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Real estate as the instrument of investment

In real estate, investment money is used to purchase Residential Land or Plots for the purpose of holding, reselling or leasing for income and there is an element of capital risk.

Residential real estate

Investment in Residential Land or Plots real estate is the most common form of real estate investment measured by number of participants because it includes property purchased as a primary residence with DTCP Approved Gated Community Residential Plots. In many cases the buyer does not have the full purchase price for a property and must engage a lender such as a bank, finance company or private lender. Different countries have their individual normal lending levels, but usually they will fall into the range of 70-90% of the purchase price. Against other types of real estate, residential real estate is the least risky.

Investing in Plots has been a way to slowly but surely accumulate wealth for as long as the concept of investing has been around. In fact, real estate investing is most likely the oldest form of investing, predating stocks, currencies and other modern investment vehicles. Hundreds of years ago a person could purchase a tract of land and make improvements to it by clearing debris, draining marshes, and even building a structure on it to increase its value. Making improvements to an unimproved tract of land is not the only way to invest in real estate. There are other methods that can be pursued. Some of these methods are very complex (such as property swaps) while others are so simple that nearly anyone can implement and profit from them.

One of these simple but effective strategies is investing in Residential plots in Chennai. Residential investment property can include single family homes, duplexes, triplexes and even small apartment buildings. The strategy involves purchasing one or more of these properties with a small down payment, renting the property out to tenants, and then using the monthly rental receipts to pay the monthly mortgage. This strategy lets an investor use other people’s money to build wealth. It’s not a fast strategy for wealth accumulation, but definitely one that works.

The investor has three options after the mortgage is paid off. First, the owner can continue to rent the property himself to tenants and enjoy 100 percent of the rental receipts. The investor can also let a property management company take over the management of the property. This still lets the owner keep as much as 80 percent of the monthly rent. Lastly, the owner can sell the property for a very nice capital gain. The money can then be used to buy an annuity to live on for the rest of his life.

Investing in real estate is a method of wealth accumulation that’s been around for many years. It’s still a strategy that makes a lot of sense today, especially in a time of stock market uncertainty.

Management and evaluation of riskis a major part of any successful real estate investment strategy. Risk occurs in many different ways at every stage of the investment process. Below is a tabulation of some common risks and typical risk mitigation strategies used by real estate investors.

Risk
Mitigation Strategy
Fraudulent sale
Verify ownership, purchase title insurance
Adverse possession
Obtain a boundary survey from a licensed surveyor
Building component or system failure
Complete full inspection prior to purchase, perform regular maintenance
Overpayment at purchase
Obtain third-party appraisals and perform discounted cash flow analysis as part of the investment pro forma, do not rely on capital appreciation as the primary source of gain for the investment
Cash shortfall
Maintain sufficient liquid or cash reserves to cover costs and debt service for a period of time.
Economic downturn
Purchase properties with distinctive features in desirable locations to stand out from competition, control cost structure, have tenants sign long term leases
Underestimation of risk
Carefully analyze financial performance using conservative assumptions, ensure that the property can generate enough cash flow to support itself
Market Decline
Purchase properties based on a conservative approach that the market might decline and rental income may also decrease
Tax Planning
Plan purchases and sales around an exit strategy to save taxes.