scorecardresearchDoes real-estate investment help you retire early?

Does real-estate investment help you retire early?

Updated: 29 Jun 2022, 08:46 PM IST

Real estate investments have been in vogue since ancient and medieval times. The propensity to invest in property is still there, albeit replaced by other investment options. 

Investing early in real estate reaps rich rewards 

Investing early in real estate reaps rich rewards 

Remember the famous quote by the famous author Mark Twain, “Buy land, they're not making it anymore”. This affinity toward buying land or investing in real estate is from time immemorial when many people put their money in real estate so that they could benefit by selling the properties later at higher rates.

With stocks playing swinging up and down and teasing the investors with their volatility, it is time to renew your outlook toward real-estate investing. If you are looking to accumulate a large corpus after 10-15 years, investing in real estate is an option you must seriously consider.

Our old generations are known to have laid considerable stress on buying huge swathes of land. Money was tied up to large tracts of land, thus, affecting their liquidity, though their financial statement tilted heavily toward the right owing to the accumulation of these fixed assets. Soon real estate investment became a thing of the past as more people relied on stock markets to increase their earnings. Naïve investors losing heavily in the market then moved to mutual fund companies led by experts who with their financial acumen and experience managed good earnings on their investments. Investments in gold are still regarded as an essential hedge against inflation. Exchange-traded funds attracted investors’ attention. 

Bitcoins and non-fungible tokens (NFTs) are the new fad of Generation Z looking to grow their money quickly. Unfortunately, with the crypto market having fallen more than 90 per cent of its value and many stocks now titillating at 52-week low prices, many investors are now relying on their real estate investments.

Many analysts confirm how early and sound investments in real estate can help you earn the necessary corpus and retire early.

Start early

Like most other investments, you must invest early in real estate. The reason being real estate prices rarely fall. Even if they have to fall, they do not go down beyond a certain point, thus, protecting the value of your investments. Also, with added focus on infrastructure, it is assumed that real estate prices would skyrocket in the future. To wait for and then invest means putting in more capital for the same land or property that you would have bought earlier using much lesser capital. Also, when you are young, you are burdened with far fewer family responsibilities and can search for alternative income sources, thus, helping you to repay the loan taken to buy the property.

Lower debts

Have you noticed how the liability of a major loan causes you to refrain from incurring added debt including credit cards, personal loans, etc? Since you have invested in real estate with the hope of retiring early, it makes more sense to balance your assets and liabilities in a way that the latter do not override the former. So, instead of splurging your money on expensive gadgets or showing off your newly acquired employment status by taking on more credit cards than required or seeking personal loans to pay for unwarranted purchases, allocate your money to real estate investments that will help you grow rich in the long run.

Rental income

Does your friend’s Income Tax Return look loaded with rental income earned from properties? Fret not, as you can also retire early if you have more rental properties to earn from. Rent is a continued source of income that you can use to prepay your current loan or invest in other high-yielding investments. Also, as your income grows, your capacity to invest in properties with a high rental yield also goes up.

However, for this, you must be aware of the area or locality where you are planning to make your investment. For example, a property bought in a remote location or a riot-ridden locality will not fetch much rent. Maintaining that property will also involve greater costs, thus, pushing you into more liabilities than financial gains. Also, if you have decided to retire early, investing in a series of rental properties will yield you a higher and more consistent income than just one huge property located at some ambiguous location.

Re-think your investments

Your asset today may be your biggest liability tomorrow. This is because things may not go as you planned. There is a distinct possibility of you having to sell out your property at a much lower price due to unforeseen circumstances like war, plague, floods, infiltration, communal clashes, etc. This explains why you must not rely only on your real-estate investments and must look at alternate investment options too.

Real estate investments are great if done early. Exercise prudence in choosing your real estate investments. Investing in property is a great way to reach your financial goals early in life only if done with necessary consideration.

REIT offer exposure to real estate market without a lot of the hassles that usually come with it. 
First Published: 23 Jun 2022, 08:57 AM IST