From an investment point of view, if possible, you should buy a second home before retirement. If your employer does not arrange EPF or retirement fund for their employee, in that case, a second home is most important before retirement, because once you retire this will give you regular rental income. It is obvious that individuals who invested in residential property cannot be losers, as the residential property will give a huge benefit one can bank upon when the chips are down. Also, this kind of investment can be an excellent source of profits for people who could be out of a job at moment’s notice.
Many individuals with investable surpluses regularly focused on the financial condition of the market, no matter it is debt or equity. Buying a second home is an effectual way to multiply your money with monthly rental income as the bonus. Let’s look at the various reasons why this could even be the best way for investing for a salaried individual.
- Residential property value in India has grown at between 15% and 20% per annum, from the last 50 years. This growth is expected to unchanged, thanks to the combination of a range of enabling reasons. These comprise a positive demographic division in India, rising urbanization and a rising choice for small families.
This appreciation value is similar to the investment in the Equity Capital Markets. If truth be told, there is the extra advantage in residential property that one is secure the variability.
- There are many tax benefits that can be accessible with buying a second home. These comprise: The rental income received from the second home (saved from maintenance cost) can be set out for the interest paid on the home loan taken for the second home. In any case, the rent is less than the interest paid, then the resultant ‘Loss from House Property’ can be set off against your regular income.
As a result, there is a tax hedge provided by the property till it begins to pay for itself. When the property is sold, the acquisition cost (adjusted for indexation) is subtracted from the sale proceeds and only the left balance is payable for tax.
- Purchasing of second homes is the only way in investment for which is affordalble for the people depended on salary. Any other medium of investment, whether share, mutual funds or Gold need to be made out of one’s own complete savings. But in residential property, one can invest by just putting only 20% of the cost and take a home loan for the rest.
- So in that case, mathematic for investing in a second home is very straightforward. You can calculate like this. You are buying the asset by just paying only 20% of the cost. Your average cost of financing the remaining is 10%. The rental income is 3 – 4% and value of the property is rises by approx 12% per annum. Your financial situation every year is as follows. As is evident, the return on the investment is quite healthy.The municipal corporation taxes to be paid and the costs of the maintenance the property have not been shown. But, the complete picture does not change extensively even with their addition.
- A residential property is a stable asset and is not bought and sold time after time. As a result, it lets a longer time frame for any appreciation to play out. There is no hunger or craving to redeem when the value are far above the ground and there is no fear when prices are stable. An important mental factor is that realty prices do not change on a daily basis (as in gold and shares etc.) This makes the home a comfortable investment to hold.
- There are many things that one should be susceptible to, before purchasing a second home. Buyer should be at ease with the monthly installment which has to be paid over the long term. As well as, a residential property takes some maintenance time after time. And individual with transferable jobs will face some challenges for monitoring the property. Additionally, investment in the residential property needs a careful valuation of the real estate builder, his past performance and other legal phases of the residential property in summary; a second home is a valuable investment, particularly for the people who have limited income. It is a well-organized way to make money in the long term.
If you are looking for a residential property, you should not hesitate to invest on the peripheries of your city. With the passage of time, most big or small cities increase and slowly incorporate the outskirts into the main city. You meet many people who will tell you that they came to that part of the city when it was without any meaningful public or private infrastructure. But these days, it is a different story there. With growth, the price of their properties has gone up many folds, which has altered the class character of a large number of people who invested here several years ago. As the prices rise in the main parts of the city, one should not mind investing in peripheral or little-known regions of the city. Godrej Villas in Greater Noida at Sector 27 nearby Pari Chowk is one such opportunity for the real estate investors and second home buyers. Infrastructure is already well developed there with many upcoming advantages of connectivity, but property prices are still here under reasonable price tag and expected to grow in near future.