The Buyt Desk
Investments are really important for your future planning. Financial experts always advise the sooner you start saving and investing the better you are. It is important that you make headway towards investment as soon as you start earning. But real estate/property should never be your first investment as it can be financially draining.
Love of owning a property
We love to ask people if they reside in a rented house or has he/she bought a house. Owning a property looks like an accomplishment. Numerous people have made a big fortune by investing in real estate. But if you think you can also make the same amount of money by investing in property as your first investment, you should reconsider this idea. It is because, like any other business, property investment also involves risk. Regardless of which property you are buying, whether you plan to sell it or give it on rent, buying a property involves lots of cash. If you don’t have enough cash then loans are an easy way for buying a property. They are easily and readily available by a plethora of financial institutions and banks.
Should you opt for a home loan?
Buying a property on loan has many drawbacks: First, it does not guarantee a return. The price of the property does not grow overnight. You will have to wait for years to get a return from that investment. Furthermore, it is not always necessary that property prices will grow as anticipated and by the time your property price appreciates, you would have paid a good amount of money as an interest to the bank. Second, it does not give you liquidity like other investments such as mutual funds or equity. These assets can be sold anytime in parts or whole to meet the financial requirements. It could also be used as collateral to avail a loan.
On the other hand, the property purchased on loan in some conditions negatively impacts the individual’s credibility. It might create a hurdle in borrowing another loan.
The investment in other investment products would give enough leeway to pay the instalments and cash withdrawals. You can skip investing for a couple of months in the situation of financial emergency without having any negative impact on your investment plan, instead, it allows you to take out the required fund anytime to meet the financial need.
If you buy land by taking a personal loan, you won’t get the tax benefits until you construct a house on that land. So again, it is not going to give you any tax benefit. On the other hand, investment in PPF, NPS, and other similar products will bring marginal tax benefits for you.
If you are planning to start investing, choose the right product. Take the help of financial planners to get the necessary guidance. Don’t copy others for investment because what worked for others might not work for you the same way.
