Category Real Estate

You probably don’t want to be a landlord if you’ve ever had one: It doesn’t appear that taking calls about over sized bugs and overflowing toilets is the most exciting profession in the world.

However, if done correctly, real estate investing may be profitable, though not spectacular. It can assist diversify your current investment portfolio while also providing an additional source of income. And many of the best real estate ventures don’t necessitate attending to every whim of a tenant.

The problem is that many new real estate investors have no idea where or how to begin. Here are some of the top real estate investment opportunities, ranging from low-maintenance to high-maintenance.

Best ways to invest in real estate

Buy REITs (real estate investment trusts)

Real estate investment trusts (REITs) allow you to invest in real estate without owning the property. They’re companies that own commercial real estate, such as office buildings, retail spaces, apartments, and hotels, and are sometimes compared to mutual funds. REITs tend to offer significant dividends, making them a popular retirement investment. Investors who do not require or desire monthly income might have their dividends automatically reinvested to increase the value of their investment.

Use an online real estate investing platform

You’ll understand online real estate investment if you’re familiar with organisations like Prosper and LendingClub, which connect borrowers with investors eager to lend them money for various personal requirements like a wedding or house remodelling.

These platforms bring together real estate developers and investors looking to fund projects with financing or equity. In exchange for taking on a large degree of risk and paying a fee to the platform, investors hope to get monthly or quarterly dividends. These are speculative and illiquid, like many real estate investments, in that you can’t readily dump them like a stock.

Think about investing in rental properties

When Tiffany Alexy bought her first rental property at the age of 21, she had no intention of becoming a real estate investor. She was a college senior in Raleigh, North Carolina, at the time, and she wanted to attend graduate school in the area, so she believed owning would be preferable to renting.

Consider flipping investment properties

This is HGTV in action: you buy a low-cost home in need of some TLC, renovate it as cheaply as possible, and then flip it for a profit. The approach, known as house flipping, is a little more difficult than it appears on television.

“There’s a higher element of risk,” Meyer adds, “since so much of the math underlying flipping involves a very accurate estimate of how much repairs will cost, which is not easy to accomplish.”

Rent out a room

Finally, you may rent out a portion of your home to get your toes wet in the real estate seas. This type of agreement can significantly reduce housing costs, allowing people to stay in their houses while still reaping the benefits of property appreciation.

This is especially important for the elderly. According to the Joint Center for Housing Studies at Harvard University, a quarter of adults aged 65 and more who lived alone spent more than half of their income on housing in 2016. For elderly persons living with roommates, the percentage declined to 12.9 percent.

Our Property Management Company is a cumbersome and time-consuming process. And it gets a tad overwhelming for landlords who are living away from their residential property to maintain and manage their property. This is where LuXia LLP walks in to simplify property management company of your property.

For NRIs and even for Indian property owners living in cities other than their property our property managers can help tremendously. There are many benefits of using a property company. For instance, to rent a home, property legal documentation, remittance of rental dues and property maintenance entail the requirement to use services of a NRI property management services for NRIs.

In an investing portfolio, real estate is the finest alternative. Wealthy investors have been known to amass vast sums of money in the Real Estate market, and they have always encouraged others to do the same. Despite this, many inexperienced investors and first-time buyers have remained wary of real estate investments. The majority of new investors have been put off by the requirement for finance, but that is changing now.

7 must-know facts about property investment for beginners in India

1. Real estate is locally driven

Local metrics have an impact on property investment. India’s real estate market, for example, is vastly different from that of the United States. Even within India, the real estate markets in Uttar Pradesh and Haryana have distinct characteristics. Further, despite their numerous similarities, the real estate markets of Gurgaon and Sonipat in Haryana are not the same.

2. Real estate is a long-term proposition

Real estate is generally not the best place to invest if you want to generate quick money. In real estate, value appreciation takes time. If you buy a plot in a new neighbourhood, it may take several years before you can sell it for a profit. In real estate, nothing changes in months.

3. Real estate needs legal & financial understanding

While real estate development in India has mainly been unregulated, allowing investors to avoid money on taxes, various rules and regulations have been implemented in the last half-decade to restrict the misuse of real estate investment in India. Beginners who want to invest in real estate and make a fortune must have a thorough awareness of all of these laws. The RERA Act, the Benami Properties Act, and the GST Act are examples of these legislation.

4. Get assistance

While study and development are essential for a novice looking to make it big in real estate, they may not always be enough. Because of the legal and financial complications, a novice investor might benefit from some assistance. It’s just as crucial to seek advice from lawyers, chartered accountants, and property brokers as it is to learn everything there is to know about real estate investment in India. As with any subject, books can only teach you so much; a major part of your knowledge will come from the professionals you meet along the path.

5. You need more seed money in real estate than any other asset class

Low-cost products such as real estate investment trusts and infrastructure investment trusts have recently been introduced. Unlike equities and fixed deposits, however, real estate does not allow you to start with a little amount of money. To accept the risk, one must have a considerable sum of money in their bank account. Although it is difficult to give a precise figure, local conditions are the most important influencers of the initial capital. It’s reasonable to state that anything less Rs. 10 lakhs is out of the question.

6. Be mindful of tax implications

Profits from real estate investments, like any other source of income, are subject to taxation by the government. Gains from property investments may be eroded by taxes. Various laws, on the other hand, aid in the reduction of tax liabilities. Learn about the legal strategies to reduce your real estate income tax liability.

7. Know about additional monetary burdens

Stamp duty and registration fees on property purchases provide a significant source of revenue for states. These taxes raise the cost of property investment significantly. Consider these when determining the amount of money to invest.

Our Property Management Company is a cumbersome and time-consuming process. And it gets a tad overwhelming for landlords who are living away from their residential property to maintain and manage their property. This is where LuXia LLP walks in to simplify complete property management services of your rental property.

For NRIs and even for Indian property owners living in cities other than their property our property managers can help tremendously. There are many benefits of using a property company. For instance, to rent a home, property legal documentation, remittance of rental dues and property maintenance entail the requirement to use services of a NRI property management services for NRIs.

Whether you’re looking to rent a home or buy one, you must base your decisions on your needs. Of course, with property ownership, you can enjoy the benefits of capital appreciation over time. But, conversely, when it comes to renting a home, you have the flexibility of using a property as and when required.

Going by your financial position, you must opt to either buy a home or rent one.

Scroll down to know about the different factors to consider before deciding whether renting or buying is your best bet.

• Consider annual payments

Before buying a home, the average person considers all the related aspects. While purchasing a home is an emotional decision for some persons, others prefer buying property over renting for the convenience benefits.

However, the property maintenance experts opine being financially prudent. They recommended buying a home if that is more profitable for you. On the other hand, you might want to consider renting a house if doing so makes more economic sense.

An important aspect that requires consideration when deciding between buying or renting a home is to compare the annual expenses.

In the case of home purchases, you have to pay a mortgage. A mortgage has two components: interest and principal. Because the principal is part of your savings, you should not include this component when calculating your expenses.

A prominent property management company in Delhi NCR will suggest using the interest component for calculating your expenses. This is because interest comes under your expenses. For example, your costs for buying a home include insurance, maintenance costs, property taxes, and interest (after subtracting the tax shield).

As far as your expenses for renting a home go, your calculations are relatively simple. First, you have to pay a deposit to your landlord. Deposit is not an expense but an interest-free loan, for you get the money back after the stipulated rent duration.

Other than that, you have to pay monthly rent. Here, you may want to incorporate the opportunity cost of your down payment if you’re buying a home. As such, you would earn income on your down payment money if you were not purchasing a home. So, you must deduct this amount from your monthly rent charges.

Thus, you have to compare your annual expenses of renting a home or buying one beforehand to make an informed choice.

• Future annual costs

Buying or renting a home are not short-term decisions. Also, you have to be committed to your choices for many years. So, comparing annual figures for the current year is not sufficient. Instead, it would be best to study your future expenses and cash flow to get an accurate picture of your costs.

Now, the story gets complicated because you cannot judge your property capital appreciation over the years. Yes, supposedly, you alter your capital appreciation by even a small percentage. But, the net present value of your property can change by a considerable amount.

Predicting future property prices is not easy too. So, the property managers tell you to be wary of your future assumptions when calculating your future property expenses for a precise representation.

• Risk for appetite

When concerned with your rent vs. buy decisions, your risk appetite also matters. If you have a risk appetite, you may think of taking a mortgage. With a mortgage, your risk increases because of the interest that you’ve to cough up. In addition, your net worth can change significantly if you’ve taken a mortgage due to market fluctuations. The reason being, a mortgage is a highly leveraged bet.

The rental property management professionals will recommend renting a home on the flip side if you’re not much of a risk-taker. You can always change homes and neighborhoods if rent rates rise in a specific locality.

• Constancy Vs. Flexibility

While owning a home provides stability, renting a house offers flexibility benefits. As a homeowner, you do not have to move homes frequently. And if you’re looking to experiment with different apartment sizes and localities, renting seems a natural choice.

In all, given your requirements, you should decide whether to buy or rent a home.

About LuXia LLP – A Property Management Company

At LuXia, we manage properties of landowners who reside elsewhere. Approach us to know about your various options for renting a home. We are well-versed with the real estate market and can offer houses on rent at competitive rates. Be assured that we will provide you with the best options as per your budget and preferences.

Alternatively, if you’re a property owner looking for top-ranking property management services, you can contact us to know more about how we can help you get the best deals.

When you’re investing in real estate, you have to consider several factors because of the high costs involved. Yes, you have to research extensively to know whether the stipulated investment is worthwhile or not.

Of course, you can approach the property specialists, who conduct a detailed study to determine whether the investment is feasible or not. For this, the key performance indicators (KPIs) help them to gauge the value of the property investments. Now, real estate KPIs are financial measurements that take into account different metrics to predict property values.

Here, we have listed some KPIs that have come in handy for real estate investors and rental management companies. However, note that KPIs have their limitations because they are only estimates. So, they do not factor in abstract values that can influence the purchasing decisions of investors, including future market rates.

• Gross Operating Income (GOI)

GOI is the total expected income, which includes all expenses. This metric records the overall income that the property produces – with the inclusion of rent charges, parking rates, among other fees.

If you talk to the property maintenance company executives, they will clarify that the GOI metric gives a complete picture of how much money a property generates or its estimated monthly value. Also, being a hypothetical figure, the GOI does not encompass any unwarranted losses like vacancy.

• Occupancy Rate

The rent management specialists will always advise maximizing the occupancy rate of your property to minimize losses. This is because vacant properties do not generate any income, while you have to continue bearing the operating expenses.

No doubt, property owners try to attract tenants, though achieving a 100% occupancy rate is not always possible. To know more about the precise occupancy rate of a property, you should learn about its previous occupancy rate.

• Net Operating Income (NOI)

The NOI is calculated by eliminating the operating expenses from the GOI. The NOI provides a basic estimate of the profitability of the property. Management fees, maintenance charges, taxes, insurance, utilities, and vacancy rate – all are considered when calculating the NOI.

Even so, the NOI only displays the amount of surplus money that a property can generate every month. This metric does not factor in the initial investment expenses or one-time costs such as remodeling works and other interior designing Delhi costs.

• Capitalization Rate

The cap rate is calculated by dividing the NOI with the property’s prevailing market value. The residential property management agents will further explain that you can get an estimate of the basic property value via the cap rate.

Importantly, the cap rate is not derived after accounting for the initial investment costs, which may vary depending on agreement by parties and other market factors.

• Internal Rate of Return (IRR)

With the IRR, you can get an estimate of the ability of a property to earn profits.

The NRI property management experts recommend going for a property with a high IRR, for they are profitable investments. The IRR considers the property sale value, entire cash flow, and initial investment costs. As such, you get a clearer idea about how much income the property can generate over the long run. The IRR does not incorporate future investment figures and other influencers.

• Cash on Cash Return

Using the CCR, you can compare the initial property investment with the probable monthly income. To compute the CCR, you have to divide the projected property income by the total investment figure. In turn, you can know how much percentage of your investment you’re getting back on a monthly basis.

As always, the property registration Delhi professionals will ascertain that the CCR does not include any unforeseen costs.

• Return on Investment (ROI)

When computing the ROI of a property, you have to calculate the profits accrued and deduct the overall investment figure. More so, you must study the IRR and NOI, and you will know then how close your initial estimates are to real costs and profit.

• Loan to Value Ratio (LVR)

The LVR helps financial organizations to analyze the risk of loans. Now, when you’re taking a loan to invest in a property, the LVR metric helps lenders to better understand your financial position.

In the case of high-risk loans, you have to pay higher interest charges and extra fees – all of which increase your general investment costs.

OVERALL

As a property investor, you may want to rely on property management company experts for their guidance. The real estate professionals can reveal more about the related risks, budding opportunities, duration, and viability of the investments that you’re pondering over. In turn, you can evaluate all the important factors before making your purchasing decisions.

The real estate experts suggest understanding the impact of the Covid-19 pandemic before your property buying expeditions.

Buying a home imposes financial burdens on investors since they have to cough up money for the down payment and pay EMIs every month for several years. And the Covid-19 epidemic only adds to property investors’ woes.

Now, if you were planning to purchase a home this year, the unexpected turn of events may have left you wondering how to go about your plans from now onwards.

However, you should first understand how the pandemic affects the real estate market.

Real Estate Sector against the Covid-19 pandemic backdrop

For some time now, the realty sector has been tackling a credit crisis, slackening economy, and rising inventories. And, with the recent Coronavirus epidemic, the scenario seems to become grimmer.

Owing to the nationwide lockdown, most construction activities were halted. And many laborers were seen returning home due to uncertain times ahead. As a result, the construction industry has to grapple further with labor shortage in the near future. This will lead to disruptions in the recovery course of the real estate sector.

To complicate things further, several developers have taken large-scale loans. And, if they cannot redeem their value, they will be dealing with a liquidity crisis soon enough.

Having said that, the government recently advised the state governments and union territories to prolong by six months the property registration process and deadlines of all certified projects which will expire on or before March 25^th, 2020. Also, they must comply with the stipulated instructions without any separate applications for further easing the stress of property developers.

Additionally, the Reserve Bank of India announcement to slash repo rate by 40 basis points to 4% will offer some relief to the developers. However, no clarity of when the realty sector will recover is yet coming forth.

The pandemic crisis from the Home-buyers’ standpoint

Conversely, if you’re a current home-buyer who has taken possession of your property and your income sources have not been affected due to the Coronavirus pandemic, then you stand to gain.  Because home loan interest rates will touch new lows owing to the RBI’s latest repo rate cute notification.

The groups who are servicing a repo rate-linked loan can expect their EMIs to subside soon. On the other hand, those people who are servicing MCLR-based loans may have to wait for some time until the lender resets such loan rates.

Plus, lenders have been instructed by the Central bank to extend the loan moratorium option to borrowers by an extra 3 months. In turn, the borrowers can manage their finances more efficiently amid these extraordinary times.

Even so, you must note that this EMI holiday is not a waiver but only a repayment deferment. Besides, interest rates will continue getting accrued during these 3 months. In the process, your EMI burdens will start mounting – particularly, if you’ve recently started repaying your home loan.

Your best bet is to go for this facility only if you’re having financial troubles. Also, if you plan on availing this option, make sure you have a sustainable plan to prepay the accrued interest during the moratorium after the expiry of the EMI holiday.

Moreover, the government’s initiative to extend the deadline of the Credit Linked Interest Subsidy Scheme (which comes under the Pradhan Mantri Awas Yojana) to March 31st, 2020, could realize the home-buying aspirations of middle-class families amidst the ongoing economic hardships.

As part of this scheme, families having annual household incomes in the range of 6 lakhs to 18 lakhs per annum are eligible to avail the benefits of an upfront interest subsidy up to Rs 2.35 lakh on the approved home loan for one more year.

Nonetheless, if you have not yet taken possession of your property, you have to wait for some time because of construction lags. And if you’re looking to purchase a home, you might be better off with a developed property as compared to one that is under construction. Further, you could get better offers because the latest developments can drive property rates to go down shortly – many experts and property managers say so.

However, if you’re equipped to take some risks (including delayed completion or other market-linked ones), then you can consider investing in under-construction projects. Only be on the safer side by checking the builder’s record, credentials, financial holdings, RERA property registration, and bank partnerships before finalizing your plans.

So, how should you move ahead?

Keep in mind that the Covid-19 crisis will lead to property registration delays and other clearances. More so, since people are losing income sources, they may not be able to pay EMIs.

Simultaneously, the post-Covid-19 era will witness a fall in property prices because of low loan interest rates. Thus, prospective homebuyers should consider all related aspects thoroughly and take practical decisions.

Finally, if you’ve purchased a property recently or intend doing so after easing of lockdown norms, you may not want to delay purchasing a home-loan insurance policy or term insurance policy – so, you’re well covered. Talk to your property management company, real estate advisor, or financial planner for they can help to draw viable strategies.

LuXia can help you!

We are a property management company in Delhi NCR catering to the end-to-end property needs of home owners who have their property in India. If you are stuck with your property possession, or property registration, or rental property management, or interior designing, our property management services can help you.

contact@theluxia.com |   +91 9810505543