One of the most controversial investment debate is discussing “real estate vs mutual funds.” Internet and print media is full of recommendations and suggestions by those who have never invested in any of two. M1 Homes, the leading luxury real estate developer in Bangalore brings you an in-depth knowledge about both the investment opportunities to help you choose the best.
Know where you are
Before you take up any opportunity, you should first understand where you stand. Both the markets are different, and they require different expertise, so it’s better you analyze your current situation keeping the risks and benefits in mind.
Real estate requires a bigger amount than what you can start with in stocks. The biggest reason why so many people are not eligible for a real estate purchase is lack of funds. Real estate properties are physical assets you can own if you have a significant amount of money.
You need to have money for at least the down payment. Why many people don’t invest in real estate because they look at the total price of a property. Let’s say you want to invest in luxury real estate in Bangalore. The first thing that can come to your mind is the property price. When you see the villas ranging between lac to crore bar, you ditch the idea at the same moment thinking that “I don’t have this much to buy, so let’s dump the idea.” This is a mistake, a big one. You don’t need to have that much in your bank account to buy a property. You can really start small.
Check if you are eligible for a loan, if yes, all you need to do is to make sure that you have just 20 percent of the total price which is five times less than the listing price. If you are not on the other side of the fence, your next question might be “is it worth investing in real estate?” The answer is – yes, it is. With real estate, you don’t buy a business that you don’t manage so it can fail anytime because, with stocks, you do this. With mutual funds, you invest in holdings which you can never manage with freedom.
Coming to mutual funds, these holdings are managed by professionals, let’s say bankers or people who know inside and out of economics. But, the biggest challenge here is, the professionals do not represent you. They represent their own brand, so it is very obvious that you are not at the top on their list of priorities. Risks associated with real estate are limited but manageable. You’re fully in control of your property.
Given the data from around 100 years, it has been proven that the price of real estate doesn’t drastically go down, but you can’t expect the same from mutual funds because their values are market dependent. In real estate also you may find such dependencies, but the core factors that affect price positively or negatively are very different here.
Where should you go?
Just read the following and you decide.
- You invest in something tangible. You actually own it
- It’s more difficult to be cheated in real estate market
- Real estate can easily protect you against a loss
- Using debt is a lot safer
- Cash flow: even if your rental property is not renting, you can decrease the rent and find a new tenant easily
- New investment opportunities are easier to research
- It’s easy to get finance
- You can develop and increase value
- An asset that gives you 100% control
- You can make people pay for your investment
- Tax benefits
- It’s a way to diversify your investment portfolio
- Managed by professionals
- Lower investment thresholds
- There’s a systematic procedure for investing and withdrawals
- Automation is the key
- Tax benefits
- Low cost of asset management
- Investment in industries you know about
- Convenience of investment