Market Secrets Investment Series-Investing in Real Estate

Importance of Investing in RE

• Portfolio diversification
• Limited availability, as you cannot create/mine it
• Shelter – A Basic Necessity

Different ways of investing in RE
Rural/Agri Lands & Plots

• Flats & Individual Houses
• Stocks of Real Estate companies
• Commercial Real Estate
• InvIT
• REITs

Investing in Land/Plots/House
Pros:

• Emotional thing, Desirable – keeps the spirit up
• Limited availability – Asset appreciates multi-fold in long-term

Cons:

• Costly – needs huge capital (or should avail loan, which I’m totally not comfortable with)
• Doesn’t generate much income, ROI is too low
• Not Liquid – makes it very hard to utilize in case of emergency
• Huge taxes while transacting
• For me, house is a liability and not an asset

Investing in Stocks of RE Companies
Pros:

• Highly Liquid
• Doesn’t need huge capital
• Taxes are low
• No Maintenance charges

Cons:

• Dilutes the concept of diversification as we are investing in stocks of Real Estate Companies and not in Real Estate
• Risky compared to Actual Real Estate

Investing in Commercial RE
Pros:

• ROI is much better
• Limited availability – Asset appreciates multi-fold in long-term

Cons:

• Costly – needs extremely high capital (need to be a promoter)
• Illiquid – hard to utilize in case of emergency
• Huge taxes while transacting

Investing in InvITs – Infrastructre Investment Trusts
Pros:

• Like MF on Real Estate, small capital is sufficient
• Liquid (though there is lock-in) when compared to property

Cons:

• Mostly invests in Roads & Power Grids
• Regulatory changes affects returns
• Change in Govt may affect returns

Investing in REITs – Preferred
REITs:

• Represents Real Estate Investment Trusts (Famous in USA, new to India)
• Simply Real Estate Mutual Funds

How REITs operate?
REITs allow individual investors to buy shares in commercial real estate portfolios that receive income from a variety of properties, including apartment complexes, data centers, healthcare facilities, hotels, infrastructure and office buildings

How to invest in REITs:

• Just like MF, you can buy from brokers/directly from fund house
• First REIT will be open for subscription by March/April 2019

Pros:

• Liquidity – You buy and sell them like stocks.
• Diversification – They have low correlation with other stocks and bonds.
• Transparency – They are regulated and audited.
• They provide a stable cash flow/Income.
• Performance – They offer attractive returns.

Cons:

• Completely new for India, slightly risky but it doesn’t bother me
• Fees & Taxes – not known yet
• Market Risk Exists – They don’t guarantee a profit or ensure against losses.
• Minimum Capital Required – 2 Lakh

We have explained about this in detail in the video:
https://youtu.be/22ASzUOcjrk

To Know More about us, visit our website:
www.marketsecrets.in

To receive daily market updates, join our telegram channel:
https://t.me/marketsecrets