One of the safest investment alternatives is sometimes said to be real estate. Find out if investing in real estate is a good choice for young people by reading on. The generation before millennials invested in real estate for security and safety reasons in addition to the returns that the asset produced. Additionally, it was one of the few accessible bankable possibilities. Nevertheless, despite the variety of financial opportunities that exist today. Many young people want to buy real estate when they are still quite young. Let’s examine the motivation behind this movement, as well as its benefits and drawbacks.

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Investing in real estate

We can see how valuable land is just by applying the basic economic principle of supply and demand. As the population grows, the price of the limited land resource will only rise. “One of the safest and lowest-risk investments is real estate. Even if there is a temporary drop in prices as a result of external circumstances like a pandemic or recession, prices will eventually rise again. Real estate is an asset that you can use or rent out and still make long-term profits, unlike gold, stocks, or other financial instruments.

The cost of real estate has increased steadily over the past 10 years—from 2012 to H1 2022—in all seven of India’s main cities. In 2012, the average residential price in MMR was Rs 9,075 per square foot; as of this writing (H1 2022), the price is Rs 11,350 per square foot. In other words, a standard 1-BHK (370 sq ft) apartment cost Rs 33, 57,750 in 2012, but it now costs Rs 41, 99,500. Real estate is considered a low-risk investment due to the said property’s return on investment during the previous ten years, which was around Rs 8.5 lakh. Other cities have also noticed a similar trend.

Advantages of youthful real estate investment

Young people have several advantages when investing in real estate. “Since you secured an asset at an early age, your financial security grows multifold. Additionally, you have more time to let the property increase in value over time. It is advantageous to have a property available even during a financial crisis.

Real estate also contributes to the diversification and balance of your financial portfolio.

When it comes to money, the majority choose a home loan to purchase a home. A young shot that has age on their side can choose a longer term with a lower EMI, lessening their financial burden. One’s income rises as they become older and move up the corporate ladder, enabling them to make prepayments or raise their EMI amount and better manage their loan.

In addition, there are a few tax advantages. You are eligible for a tax break on your home loan interest payments of up to Rs. 1.5 lakh. In addition to the current deduction of Rs 2 lakh for interest payments allowed under section 24(b) of the Income Tax Act, this deduction is available under section 80 EEA.

Disadvantages of starting out in the real estate industry young

“Whether you should get involved in real estate at an early age will depend on your cash flow. Only then should you consider purchasing early if you have a reliable source of income or if you believe you can afford the property’s payments without much difficulty.

“Investing in real estate is expensive. Before you invest, be aware that you are essentially locking in sizable money at a young age and assuming financial responsibility (EMI payments). This could result in a liquidity crisis for some time. It is vital to create a sound financial strategy before investing so that you know exactly where you are financially, at least until the home loan is paid off. This would also limit the diversity of your investments.

These are the top 5 reasons to start investing in real estate at a young age:

• Time Is Yours to Enjoy

The greatest resource and luxury you have when you get started early is time. Starting out in your profession implies you don’t have a lot of obligations in your personal or family life. You have the time to research the real estate market and the kind of house you want to buy. When you do not have many debts or loans, you can make an informed choice and maybe take on the risk of real estate investments. It is always advised to do this.

• Loans are simpler to obtain.

Younger real estate investors have an easier time obtaining financing. You will have a lot more time to repay your mortgage if you are young. You will receive a house loan with a longer term and a more appealing interest rate. You’ll also pay a reduced EMI each month. If you receive bonuses or other future windfalls, you can repay in lump sums. If your income rises, you can pay off your mortgage more quickly by increasing your monthly payments.

• You Can Learn Financial Management

You will be responsible for controlling and managing cash flows each month after you start making real estate investments early in life. Will need to manage the money coming in from the investment and offset it against your mortgage outflow whether you invest in residential or commercial real estate and generate rentals from it. This will improve your ability to manage your finances since you will learn how to create and keep to a monthly budget.

• You can reach break-even sooner.

If you purchase real estate when you are young, you can count on a shorter break-even period if you plan to rent out the property to generate monthly income. If you start early, commercial real estate and even residential real estate assets will break even faster once they are squared off against the loan. After that, it’s all about maximizing profits and getting your initial investment back. The power of time is crucial once more in this situation!

• Retirement Early

By investing in real estate assets, you might become financially stable earlier than your contemporaries. Real estate investing is a long-term strategy that provides a second source of income and may enable you to choose an early retirement. Real estate investments should be made as soon as possible by those who intend to retire early and spend their time to launch enterprises, travel, or simply pursue their passions. For example, if you begin investing when you are 25 years old. You can amass significant wealth until you are 45 to 50 years old. You can anticipate a consistent monthly income without any financial obligations once your real estate investment reaches break-even point. As a result, you can retire earlier.

Things to Consider

While making an early real estate investment, there are some factors you shouldn’t overlook:

• Do your research on potential real estate investments, new sites, anticipated returns, the developer’s track record, tax laws, and governmental regulations.
• Get guidance from platforms and real estate specialists to acquire the proper perspective on the upcoming investing path.
• By choosing a co-borrower, such as your spouse, you can expand your pool of potential home loan applicants. You both will benefit from tax deductions on the mortgage if he or she is a co-owner. Additionally, you can split other expenses like brokerage, legal fees, stamp duty, and registration.
• To strengthen your portfolio and reach breakeven sooner. Put more emphasis on generating rental income from your investment rather than just on capital growth.
• Always plan for the unexpected, and if at all feasible, have three to six months’ worth of mortgage payments and two to three months’ worth of rent on hand (for situations where tenants delay payments).
• Look for homes in areas that may experience significant future infrastructure development. You can invest now in larger houses at lesser prices and profit later. But before you invest, seek advice from an expert.

Early real estate investment can help you achieve financial independence, portfolio development, and reliable income flow.

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