May 19, 2024


Mad about real estate

Scope of Investing in Real Estate and Land

Real estate includes landed property and such other possessions that are permanently and immovably attached to land like buildings. Investment is the process of purchasing assets in order to make profits by either selling these assets at a later date or by deriving other benefits like rent or dividend from the possession of these assets.

Therefore real estate investments involve acquisition (unlike other economic or financial investments, real-estate is purchased), holding and sale of rights in real property with the expectation of using cash outflows for the potential of future cash inflows, and hence, generating a favorable rate of return on that investment.

Benefits and Scope of Real Estate Investment

In contrast to stock investments, which requires more actual investment of assets from the investor, heavy leverage is possible in a real estate investments. That is to say a real estate investor can use other people’s money to amplify his rate of return and control a much larger investment than would be possible in stock and other types of investment. There are also other advantages of investing in real-estate.

Returns on investment in real estate include cash flows after paying annual tax, equity build up through increase in the value of the asset and cash flow after sale of real-estate after tax on the sale is paid. Some other non monetary and intangible benefits are also associated with investing in real-estate. For example pride of ownership, the security that the investor controls ownership and diversifying the investment process are some of the benefits of this type.

Real estate investment in productive during phases of urbanization, which more often than not is the result of industrialization. What happens in that the introduction of industries created the requirement for manpower, which triggers a wave of migration from rural areas and low tier towns. Naturally these people will require housing and the demand for houses fuels a demand for land, which in turn pushes land prices northwards. This is what is happening presently in many countries across the globe- India, China, Vietnam, Malaysia, Poland, The Baltic States, Brazil-to name a few.

In most of these countries the aforementioned trend has been found to hold true. There are no hard and fast rules on how a person can become a successful real-estate investor. The first and foremost requirement is that of having a good feel of which way the wind is blowing. That is to say that the person should know which areas are likely to experience a land boom. This knowledge can be acquired by being in touch with real-estate professionals or even with policy makers, who know where a particular investment will materialize. Then he should have the appropriate skills to raise adequate financial resources for the purchases. Once this is done the person should have the insight as to when the sale or the lease has to be made. This would give him the best deal.