You Need To Buy Property To Invest In Real Estate: A Misconception Or The Truth?
Real estate is a topic that comes up frequently in family, friends, and office talks. We all have our own opinions about real estate, which are sometimes reasonable and sometimes based on our perspectives. Here are the top ten real estate myths.
There are several myths regarding real estate investing that should not affect your decision to engage in the business. This is especially difficult if you are new to the game. It may be difficult to discern reality from fiction in the real estate sector, with numerous myths blooming from various holes. While certain misconceptions may appear to be innocuous, they might nonetheless prevent you from succeeding in real estate. While minor errors are forgiven, significant ones are not. So, if you want to thrive in this industry, you need to be aware of the misconceptions and discover the reality about each.
Due to the market situation and political attention on real estate, the general public is frequently perplexed about the business. People who are unable to distinguish between myths and realities are prone to a variety of misunderstandings. Assetmonk attempts to clarify the industry’s perplexing notions.
Real estate is frequently viewed with skepticism and contempt. Doubts and half-truths have spread several misunderstandings regarding this industry in the general public’s thinking. Assetmonk examines the top seven myths regarding the real estate sector. Also Read: Debunking Popular Myths on Fractional Ownership
Can you invest in real estate without investing in property?
- Real estate investment trusts (REIT)
A REIT is a specialized company that invests in commercial real estate through debt and equity. Introduced in 1960 to provide investors with the chance to participate in real estate as an asset class, REITs are recognized to provide a minimum 7-8 percent annual return to small and medium-sized investors. REIT investors, like mutual fund investors, own shares of the REIT and earn dividends based on the success of the REIT assets.
Experts believe that REITs would be a major changer in the Indian real estate business. They assist in the sponsorship of assets through trusts and allow investors to become owners of various properties even if they are unable to purchase an asset exclusively. According to the REIT requirements, at least 80% of the value must be invested in revenue-generating properties, with the remainder invested in under-construction projects. Investors mostly invest in REITs for better income and long-term growth.
- Wholesale real estate
Real estate wholesaling is an excellent option for people to get started in the real estate sector without investing a lot of money. It is a type of property flipping in which the investor, also known as the wholesaler, agrees to purchase a property that they feel is underpriced. The property is then profitably sold to the final user. The procedure assists a novice in gaining insight into the real estate market and learning crucial bargaining skills. The wholesaler gets money through a charge tied to the transaction, which is generally a percentage of the total property cost.
- Mutual funds for real estate
Real estate mutual funds are an excellent strategy to diversify your real estate portfolio. The principle is similar to that of a mutual fund in that the investor owns a piece of the mutual fund while the corporation owns the investment. Earnings are distributed in the form of a dividend or a portion of share appreciation. Real estate mutual funds generally invest in real estate investment trusts (REITs), real estate equities, and direct purchases of residential, commercial, and industrial properties. Small investors that are hesitant to engage in real estate directly benefit greatly from this alternative. Earnings from real estate mutual funds are affected by a variety of factors, including demand and supply demographics, market circumstances, and interest rates.
Real estate mutual funds are an excellent investment choice for someone who wants to take benefit of the real estate market’s appreciation but does not have the money to buy a house, especially in areas like Mumbai and Delhi where property prices are exceptionally high.
- Platforms for online investing
Online real estate investment platforms aggregate funds from several individuals and invest on their behalf in possibilities that would otherwise be too expensive to pursue. In terms of investment opportunities, property kinds, and investment minimums, these vary greatly. The online platforms, which specialize in both residential and commercial real estate, allow investors to invest in a single property or even a diversified portfolio of real estate.
The medium, on the other hand, is best suited for people who can afford to leave their assets unbroken for a lengthy period.
- Loans made with hard money
A hard money loan is a loan made by a person for a real estate investment. Hard money loans, often known as bridge loans, are short-term loans used to fund an investment project. The loan is offered based on the value of the secured property. Typically, the lender lends up to 65-75 percent of the property’s value and receives interest, which is often greater than on traditional property loans.
Myth vs facts in real estate
Real estate investment fallacies abound, yet investing in real estate is a significant step toward financial freedom. Real estate investment may be both exciting and complicated for first-time investors. Even after significant investigation, it is difficult to separate the truth from the false material that circulates on the internet.
Here are a few typical fallacies to avoid as a real estate investor.
- Myth: Developers purposefully postpone projects.
Fact: One of the most prevalent concerns consumers have about the real estate market is that projects are being delayed. Distressed customers frequently claim that developers purposefully delay developments to increase profits. “Developers never postpone projects by choice,” says Rohit Gera, MD of Gera Developments. A competent developer will go above and above to guarantee that tasks are completed and delivered on time. Delays in projects involve increased prices for materials, staff, and other overhead charges, which is bad for developers as well.”
The efficiency of urban municipal and civic agencies, which manage constraints on project development through approvals, has a significant impact on the process of real estate construction in India. Development projects in Indian cities are subject to a lengthy clearance procedure, which typically takes 24-36 months before construction & 6 months to a year after completion. Among the major permissions required are land approval, environmental clearance, planning is the main sanction, and, finally, the occupancy certificate. Also Read: High to Low: Evaluate How Your Money Will Grow With Every Investment Option
- Myth: Your purchasing choice should be influenced by market conditions
Fact: While the assertion is largely fair, many first-time investors do not consider their affordability before making a purchase selection. When people can afford it, they should enter the market. If you secure a house loan early in life, you will be able to purchase your home sooner than those who wait. However, the choice must be well-informed. You must determine if you are purchasing a home for personal use or investment purposes. Once you’ve determined this, determine how much of a monthly payment you can afford. It is advised that you get the advice of a financial adviser for this.
Using one can aid you in assessing your present financial health by reviewing your current income, existing assets, obligations such as other debts, insurance, investments, working years remaining, and house purchase plans.
- Myth: Real estate investing is exceedingly dangerous
Fact: The real estate market is frequently seen as exceedingly dangerous. The current state of the market, with delayed projects, sluggish demand, and rising prices, does not assist to validate this fallacy. However, the truth remains that all investment entails some level of risk. In contrast to volatile investment channels such as the stock market, the real estate industry is highly stable. Real estate investments reach their full potential when kept for an extended period.
Short-term real estate investments are more likely to result in losses. “The wise thing to do is to take measured risks and keep onto investments for a longer length of time,” Rohit Gera says. A calculated decision is purchasing a home in an area that is predicted to have major infrastructure improvements, and hence one that is likely to provide returns on your investment. Aside from that, criteria such as property type – apartment, home, villa, or plot; location – suburban or city center; budget category – inexpensive, mid-segment, or luxury housing; and market trends such as sales volume, buyer base, and recent movements in the real estate industry must be examined.
- Myth: Real estate is always profitable
Fact: On the other hand, some people think that property values constantly rise and that real estate investments should always provide big returns. While the property does not lose value over time, making a limitless profit is not a realistic expectation. Price growth is not an endless process. Property prices will cease growing if the market is saturated. Real estate prices and profits fluctuate as well, and there have been cases where values have plummeted owing to a lack of demand. Also Read: Can You Become a Millionaire Through Real Estate Investments?
- Myth: Big brands always provide the greatest results.
Facts: According to experts, it has emerged as the most common misperception in the real estate market, since major companies have failed to meet their claims of quality and timely delivery. On the other hand, there are many mid- and small-scale developers that are devoted to delivering the best in terms of quality and amenities, and who monitor the building of their projects regularly to ensure that specified delivery timeframes are met.
- Myth: Developers want prices to continue to rise.
Fact: Constantly growing prices are also unfavorable to the developer community. “Price increases are welcomed only if they are in line with inflation,” says Rohit Gera. Professional developers that are devoted to high-quality products do not support excessive and speculative pricing increases. He says that if a developer sells a property at a high price, obtaining land for the following building will become prohibitively expensive. He claims that only new entrants into the real estate market and fly-by-night entrepreneurs looking for fast riches are anticipating and may even contribute to the dramatic price spike.
- Myth: The activity is limited to major cities.
Fact: Metropolitan areas are increasingly overcrowded and unaffordable to the working class. The middle-income group (MIG) is the primary driver of residential demand, and as a result, the focus is shifting to expanded suburbs and tier II and III areas like Ahmedabad, Indore, Ludhiana, Coimbatore, and Lucknow. With stagnating demand and skyrocketing prices in major areas, smaller cities have emerged as preferable real estate investment possibilities.
This is a real estate investing fallacy you should never believe. There is a reason why open houses exist. People want to see a house before they decide to buy or rent it. Setting up an open house is advantageous if you want interested individuals to look at your home.
You may highlight the greatest characteristics of your home during an open house. This is especially beneficial if your property contains technology amenities that will appeal to the tech-savvy and younger generation.
Furthermore, you may have an open house online by offering prospective buyers an online tour of the home without requiring them to leave their homes. Again, this is especially beneficial for the tech-savvy and younger population, since they are already used to utilizing technology. When consumers can browse at their leisure, you’re more likely to find a receptive buyer.
Assetmonk is a real estate investing platform with a long history of satisfied consumers. Along with asset security, the organization takes every precaution to ensure that an investor’s experience is pleasant and worthwhile. Assetmonk additionally guarantees a 12-to-21% annual IRR on all of its assets.