Investments guide on Real Estate Sector for Millennials. Real estate investment and Millennial has been a topic of discussion for quite a while now. In regards to real estate investing, doing so at a young age is often termed as a liability. Though, specialists suggest investing benefits from an early start. The later you invest, the less will be the compound returns.
If you are a millennial and searching for a variety of ways to invest in the real estate sector that can be chosen depending on your savings, financial history, and job, read the following points to see how you can prepare yourself for real estate investment.
Things Millennials need to learn if you want to Invest in Real Estate
How the COVID has changed millennial home buying trends
The virus has forced young professionals to take a reality check,
impacting their mindsets. The pandemic forced them indoors for inordinately
long periods of home, making them rethink their home stay options. They now
want to buy spacious homes that cater to the varied needs of their families,
including that of the home office. It also altered their priorities in a way
with many preferring to invest in luxurious homes rather than opting for
foreign vacations to exotic locales.
Property buying Millennials
They are the new-tech crowd or professionals with big salaries, and
bigger aspirations the start-up founders, the stock market wealthy. Typically
double-income young families, with a pet thrown in somewhere. They have the
money and want a lifestyle to match that. They prefer all the comforts of
modern living right where they are living and so, many opt for gated
communities.
Benefits to enjoy as a Millennial Owner
Millennials and
investing are not two words that always go together. However, when it comes to
real estate investing, they should be.
Profit
Whether you choose to
rent out the property or want to fix it up and sell it, as the sole owner you
will receive all of the profit. Keep in mind that the money earned from passive
monthly rent, also offers numerous tax benefits, as well as additional
investment opportunities.
Tax Benefits
One of these tax
benefits is the ability to write off expenses that are associated with your
rental property. You can also leverage pass-through deductions and in some
cases use a 1031 Exchange coupled with a Section 121 to avoid the majority (if
not all of) the real estate taxes associated with the eventual sale of buy and
hold turnkey property. Named after Section 1031 in the IRS tax code, a 1031
exchange is a legal transaction that allows real estate investors to swap
an investment property for a like-kind property, thereby avoiding capital
gains or depreciation recapture on the sale of the property.
Complete Control
As an individual
investor, you get to determine the “where, when, what, why, and how much” for
each of your investment properties. This means that you have complete control
over your portfolio, so that, with the help of a trusted investment consultant,
you can purchase properties that meet your specific needs and help you achieve
your financial goals.
Why should Millennials Invest in Real Estate?
Having your own house is more than just a matter of pride as there are
many financial benefits attached to it.
1. Passive Income
Passive income is the money you earn without even working for it and who
wouldn’t want that? One form of passive income is rental income. Buying and
renting a property will bring a high return on your investment over time.
Therefore, purchasing property is a clever way to generate passive income while
saving time and effort.
2. Rental Income
Another vital benefit of investing in real estate at an early age is
that it will help you earn extra finances through rental income. This
secondary income can be effectively utilised to pay the monthly installments of
your home loan. Renting your property is also a great way to build up your
savings for making your other dreams come true, such as travelling the world or
pursuing higher studies.
3. Tax Benefits and huge Savings
Investing in real estate at an early age gives you the opportunity to
enjoy a wide range of tax benefits. Availing a home loan to fund your
dream home can help you get tax rebates in your yearly income tax returns.
The interest that you pay against your EMI can be easily deducted from your
total tax amount. As per the Section 80C of the Income Tax Act, an
individual can avail tax benefits for the principal amount of the home loan.
This scheme enables home buyers to claim up to Rs.1.5 lakhs as tax
deductions. Millennial home buyers can enjoy the twin benefits of enjoying tax
benefits along with ensuring abundance of savings for the future.
4. Appreciation Rates
The biggest reason to invest in real estate is that its value increases
over time. By investing in property at a young age, you will ensure a longer
time to witness the appreciation rates. A residential property typically
witnesses a yearly appreciation between 10-20% depending on factors such as
location, inflation, and market demands at play.
How to do it?
1. Build your Credit
The easiest thing you can do to get started on your journey to property
investment is to increase your credit score. Credit takes time to build, so
even if you have Rs.0 saved or are 10 years out from buying a home, you need to
start building credit today. Credit cards are an easy way to start working on your
credit score in addition to receiving some rewards benefits, but you must
treat your credit card like it is a debit card. Only spend what you are able to
pay off in full each month and never miss a payment because this will be one of
the largest determining factors of your credit score.
2. Do Research on the area you want to buy the Property
Looking for the perfect property to buy can be one of the most fun yet
frustrating parts of property investment. Luckily, a lot of upfront work can be
done on your own, and you don’t need to rely only on what your real estate
agents puts in front of you if you prefer to be more involved. Of course, you
want to find a home you find beautiful and love at the moment, but you need to
think 5, 10, 20 years from now and how this investment will hold up in the
long-term.
3. Look for a good Resale Value
Resale sale Value is an important thing to consider before you plan to
invest or buy a property. Property buyers never consider resale
value when they buy. They make the mistake of focusing solely on a prime
locality or the budget of the property. If you choose the wrong property or
location, it is possible that your future sales price will always be less than
the other homes around it.