At What Age Should You Invest in Real Estate?

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

In India, the current mantra is that property investment is ideal only for upcoming or established career makers – but is this true?

How do banks, lenders and the property sector at large view investors who do not fall in that age bracket anymore?

Can one be too old to put money into property, and would one have missed the chance to grow their wealth through real estate at some point?

Of course, it is true that banks are willing to lend to a person only for so long; when a prospective borrower is looking at retirement in the near future, the concept of giving them a long-term home loan understandably does not make much sense to them.

Let us examine this a little more closely.

When a person is in his or her 30s, they have around 30 years of active professional life ahead of them. Naturally, this gives them abundant time to develop a large property portfolio.

However, even when they are in their 40s, they are far from too old to successfully invest in property. There are still as much as 20 years ahead as an income-generating citizen – and even more if one is successfully self-employed or runs a business.

In other words, there is still plenty of time ahead to make some profitable property investment choices even in one’s 40s.

Of course, it goes without saying that the sooner one invests, the higher will be the ultimate gains because profits from property compound over time.

Home Buyers

Generally, it is assumed that one must have the ability to service home loans for 25 to 30 years to finance one’s property portfolio. However, many banks in India have now understood that people can and do work past the conventional ‘retirement age’ of 65 these days.

Interestingly, once one has secured a good portfolio of assets, one has additional clout and credibility with banks since these properties can act as collateral for fresh loans even at age 50 or above.

Definitely, the time to experiment with ‘speculative’ investment should be over by this time, as one should justifiably have a healthy aversion to risk by age 55.

By this age, the ideal strategy should be to boost the value of one’s existing assets via proven value-boosting routes such as renovations.

Without a doubt, a person who wants to keep investing in property in India at age 60 or above needs to have a very clear understanding of the market, as well as a great deal of confidence in one’s personal finances.

As already explained, it is now technically possible – under certain circumstances – to raise a home loan for property investment even after retirement.

The question whether one would want to is, of course, a personal one and would depend on a variety of circumstances – most related to one’s financial soundness and appetite for such activities.

So far, so good – but what about buying a home for personal use? This is where it gets a lot simpler because there is no ‘ideal’ age for home ownership.

If one has been living in rented homes all one’s life, buying a home even at 65 makes perfect sense. In the first place, it is the perfect retirement gambit, as it provides freedom from the recurring expense of monthly rent.

Secondly, it secures a sound asset which gives unmatched financial security and can be used to raise funds in emergencies. Thirdly, a property is the perfect bequest to leave behind for one’s children.

The bottom line is that there is definitely such a thing as an ‘ideal age bracket’ for property investment – though this age bracket is flexible depending on various factors.

However, there is no ‘ideal age’ to buy a home for personal use. The latter fact is especially true if one sees a self-owned home more as an abode and sanctuary of financial freedom and security than an investment instrument.

About The Author

Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd. is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.

How To Succeed In Property Investment

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

Getting into real estate investment without a proper understanding of what you aim to achieve is not advisable. There are many risks involved in real estate investment. However, with the right data and advice, you can definitely succeed in property investment. Here are the general guidelines:

To begin, you should know what the odds are. The fact is that the chances for inexperienced property investors to either succeed or lose a lot of money are more or less evenly balanced. The likelihood of suffering a loss is greater if the investor does not have a good idea of the state of the local property market.

Before investing in property, make sure that you have enough insurance. Many investors who have succeeded in the property arena safeguard their investments by floating a nominal limited liability company for their activities. This is certainly an option, but not really a necessity unless you are playing for very high stakes and investing in multiple properties.

Advice to End-User Investors

Property investors actually fall into two broad categories: end users and pure investors. That’s right – even end users can technically be described as investors in some cases. These individuals seek to make a percentage of profit on properties that they are themselves occupying.

This may involve partial rental or sale of a home or office, retail or factory space. This is not a very common practice, and is usually seen only in cases where the part of the property being rented out or sold would otherwise remain idle and non-productive.

A more rewarding option is the sale of the entire property. This is sometimes done for reasons other than investment – the seller may be seeking larger or more luxurious premises, may be in the process of relocation, or may not be satisfied with the property for other reasons.

There may also be a need to downgrade on certain expenses such as maintenance costs. If the sale of such a property is need-based, the profitability usually reduces since the seller needs to cash in within a limited period.

The kind of profit an end user can make on the sale of a property depends on the age and state of the property, its location and its inherent value on the market. A residence purchased five or ten years ago will have appreciated in value for the simple reason that property rates are constantly increasing. The value of the property will be even higher if the location is one in high demand.

The price a ‘second-hand’ property will fetch will also depend on whether or not it is well maintained, the facilities it offers, the area it is located in, etc.

Advice to Pure Investors

Exclusive or pure investors buy property for the exclusive purpose of earning a profit on them; they do not utilize the estate personally. The properties in question can be residential (flats, bungalows, row houses, duplexes, etc.), commercial properties (offices, factory sheds, etc.), retail (e.g. mall space) and non-developed or partially developed land.

Pure investors have a better chance of making a profit in their dealings simply because their options are wider. There is also no immediacy or urgency involved, since the basic objective is profit.

property investment

Investors of this kind should keep certain guidelines in mind:

• Location is everything. Even if rates are steeper in a preferred area, go for it. It will pay rich dividends in the final analysis.

• It is always more profitable to invest in properties under construction or still in the planning stage. By the date of actual completion, rates will tend to be higher.

• If one chooses to invest in residential real estate, the first preference should be towards flats that are located on the upper floors. They should offer a good view and ventilation. Other amenities in the schemes also matter like, the use of a swimming pool, clubhouse and other trendy facilities. They should also be backed by adequate parking facilities. Most buyers do not make compromises on this last factor, even if they give consideration to the others.

• Choose to invest in properties by reputable developers. The very name of a famous builder makes a definite difference on the bottom-line of the sales deed.

A quick note on ready for possession properties. Certain dynamics of the property market remain constant, so a profit is still possible. However, a ‘readymade’ property bought for the purpose of investment will have to be given sufficient time to appreciate in value.

Also, certain modifications specific to a potential customer’s needs may have to be made. The cost that this involves would have to be adjusted in the final amount.

Finally, if you are new at property investment and are utilizing a housing/investment loan in order to invest in property, ensure that the ratio of self-finance-to-loan amount is conducive to a future profit. Double-check all legal documents.

Property investment is not a game of blind man’s bluff. Fortunes can be lost for many reasons – spurious documentation, faulty judgment, market crashes and other unforeseen circumstances. There are a number of bases that need to be covered to reduce the risk factor.

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