Why buying a home is the most practical and wise investment?

2 Aug 2020

Homeownership is a crucial milestone in everyone’s life. When a large sum of money is at stake, worrying about getting tied down and questioning about debt management is natural. Nevertheless, investment in real estate is not just buying a house but it’s a possibility where one can leverage real estate to build wealth. Investment in real estate gives an opportunity to enjoy predictable cash flow, tax advantages, excellent return on investment and diversification.

A newly married couple recently approached us for buying a residential apartment at Magnolia Empire, situated in Madhyamgram. The couple, in their late 20s, was staying in a rented apartment but now wanted to own a home. Previously, people used to invest in real estate in their 40s or 50s. But with changing times youngsters in their mid-20s are thinking to invest in real estate considering it one of the most profitable long-term investments. Investing during the early stages of career means you have a lot of time to pay off your loans and you will learn to manage your finances much early.

Let’s give you 5 reasons to invest in real estate:

1. Value Appreciation:

Home prices typically increase in value over time, especially when it is in a good location. The longer you hold onto your real estate; the more money you will make. So, with a good investment, you can expect higher profits when it’s time to sell. For example, the price of an apartment near Jessore Road will always shoot up because that’s an important road that connects to many nerves of the city. There had been uncertain times in the housing market but it has always recovered from the past bubbles. You can make money through rental income too. Rents tend to rise over time which will ensure higher cash flow. So, buying a home means putting your capital in a safe investment where it is likely to grow.

2. Stabilizing housing cost:

The rent amount that you used to pay can be spent on monthly EMIs. Rents can go higher over time but you can control the majority of your monthly housing costs with a fixed-rate mortgage even if your property taxes and home insurances fluctuate. When all your debts are paid, you own an asset outright that lets you achieve a mortgage-free living. When you will reach retirement, enjoy saving or spending the significant portion of your income previously assigned to housing.

3. Tax advantages:

Owning a home allows you to avail of various tax benefits. You can claim exemptions on the interest you pay on your mortgage from your taxable income. Greater the interest you pay on the mortgage, bigger the tax break. Under Section 80C, you can claim tax benefits up to Rs 1.5 lakh on repayment of the principal component of the home loan. If you are a first time home buyer, you can claim deduction under Section 80E, provided your home loan amount doesn’t exceed 25 lakhs.

4. Build equity:

As you pay down the mortgage of your home, your debt decreases and you build equity. That means, as the loan gets paid off it increases the portion of the home that you own free and clear. The portion is your asset that’s part of your net worth. As you build equity, you can get a home equity loan or a home equity line of credit which will help you to buy more properties and increase cash flow and wealth even more. They are secured, carry a lower interest rate than other types of consumer loans and tax-deductible, as well.

5. Emotional security: Pride of ownership:

Real estate is an investment that you can touch and feel. Buying a home is a dream for many. We cherish an innate emotional attachment with our home. Owning a home gives you the liberty to tailor it according to your personal taste and enjoy the comforts of increased privacy. You will stay in your own home without the threat of landlord changes, lease termination or rent spikes. There is strong emotional security and pride attached with owning your home, the safest haven for you and your family.

Summary

Buying a home is a long term commitment where huge financial considerations are involved. But the risk is worth taking.