2. • Real estate is the property, land, buildings, air rights above the land and
underground rights below the land. The term real estate means real, or
physical, property.
• Investment real estate is that generates income or is otherwise intended
for investment purposes rather than as a primary residence. It is
common for investors to own multiple pieces of real estate, one of which
serves as a primary residence, while the others are used to generate
rental income and profits through price appreciation.
• It represents an important asset class within a diversified portfolio
framework because it provides investors with a relatively stable source of
income via regular distributions or rents as it has a low correlation with
bonds and stocks .
• In addition, real estate values and income should keep pace with inflation
and can help maintain real returns.
3. • Key Benefits:
Low volatility and a gradual increase in market prices lends
stability to the investment , Performance of your investment can
be increased through renovation and repairs , Regular income if
property is rented out , Easy to mortgage.
• Real Estate Property can be broadly classified into
• Commercial (Shopping centers, offices)
• Industrial (Factories , warehouses, storage)
• Residential (Houses & Apartment)
4.
5. Types of Investment
• Direct Property :Investors buy the physical asset outright and are
responsible for the maintenance, rental agreements and tax implications of
owning the property. With appraisal valuations completed annually, direct
property may provide less volatile returns than listed property.
• Listed Property: Investors hold shares in a fund or trust which uses the
proceeds to invest in a portfolio of real estate assets. This type of investment
provides investors with wider diversification benefits than direct property
because the funds usually invest in a variety of larger real estate holdings in
commercial and industrial assets.
• Global Property: There are diversification benefits for investors wishing
to invest outside of the domestic space, however one needs to be mindful
that returns can be significantly influenced by currency fluctuations.
6. Misconceptions About Real Estate
Investing
• Investors frequently shy away from real estate because they are only
familiar with the "do-it-yourself" approach - buying a small property,
improving it and either renting it out for income or selling it for a gain.
While this is still the model for many income seekers and property
"flippers“.
• There are passive investments are available that require absolutely no
involvement by the investor in managing the property:
• Real estate mutual funds and investment trusts are widely available and
provide passive investment opportunities, but investors have little say in
how the fund manager chooses to invest. Investors can sometimes select
funds specializing in certain geographic locations or types of property,
• Large private syndicates it takes a lot of money to enter these private
investment clubs, and investors have to know the right people.
• Real estate hedge funds offer professional management and
sophisticated trading techniques, but once again, participation is
limited to the well-connected.
7. Real Estate Crowdfunding
• Crowdfunding refers to a financial model, wherein, a project or
venture is funded by raising monetary contributions from a large
number of people. However, it needs three parties to take shape as a
business model – the developer who proposes his project/idea to the
crowd; people who support the idea with financial contribution; and
a moderating organization that brings the parties together.
• In the Indian realty market, this third crucial element of the
moderating agency, is missing. Often, it is the mutual trust, like in
the case of the Pune-based builder, which acts as the moderating
agency. However, not all developers in the Indian market, have that
kind of goodwill or resources. Developers too, admit that
crowdfunding is a double-edged sword and needs to be handled
carefully.
8. Reasons Why Commercial Property are
better than Residential Property
• Rental yield that you can command depends directly on the human
traffic in the area. Rental Yields may be better for commercial
properties. Thus if you invested money in such a property investment,
the monthly cash flow would be more than an equivalent costing
residential property investment in the same area.
• Improvements on the property Business tenants generally treat
properties different from residential tenants. A business owner who is
renting property would generally fix small defects in the property so
that he can carry on business and would not bother the landlord about
such small problems. But additionally, most small business owners
would generally carry out small improvements in the property that
could boost the property value of your commercial prope
9. • If you have a commercial property, you can choose a tenant that has lots
of goodwill established in your premises. This would mean that the
tenant has a lot vested in your property and would therefore pay his
rent on time to stay out of rental disputes. Contrast this with a
residential property where the tenant can run away without paying your
monthly rental and has nothing very much to loose. Collecting rental
from residential tenants seems to be more difficult as well for some
strange reason.
