Generally, you may not consider investing in property when you commence your career at an early age. This is because you may live with your parents or rent your place. A large number of young professionals consider buying their homes only when they are married.
Investing at an early age provides several benefits. When you invest early, you have a longer investment horizon, which allows you to accumulate a larger corpus and build wealth over the long-term.
Like all other types of investments, investing in property at an early age also has several benefits. Here are five reasons why investment in real estate early is advantageous:
When you buy a home, it is very likely that you avail of a loan to fund your purchase. The Income Tax (IT) Act provides several tax benefits when you avail of a home loan. The principal repayment of up to INR 1.5 lakh per annum is tax deductible under section 80C. Moreover, interest up to INR 2 lakh per year is eligible for benefits under section 24.
When you invest in a home in your 20s, you are able to take advantage of these tax benefits earlier, which in turn increases your savings.
Higher return on investment
Like most people, your primary objective of investing is to earn high returns on investments (ROI). You may choose from several investment products such as insurance plans, National Savings Certificate (NSC), Public Provident Fund (PPF), mutual funds, fixed deposits (FDs), and many more. However, compared to most of these, investment in real estate offers higher ROI in most locations.
Investing at an early age allows you to use the power of compounding to build wealth over the long-term. Although the prices may fluctuate due to economic conditions and infrastructure regulations, the effects of these on an investment property are set-off when you remain invested for the long-term.
In Indian society, properties are passed on from one generation to the next. When you invest in an apartment, you not only save taxes but are also able to create an asset. Over the years, the value of this asset multiplies thereby giving you significant gains.
It is likely that you may invest in a smaller property at an early age. However, as your family grows and responsibilities increase, you may require a larger property. You may achieve this by exiting your investment in real estate and using the money to pay for a larger home and funding the balance with a loan.
Easy availability of loans
Before you invest, you need to plan your finances and accumulate the required capital. This is where home loans are beneficial. As a young adult, you have several years to repay the borrowed amount. Moreover, you may choose for a lower rate of interest and may make lump sum repayments whenever you receive a bonus to reduce your debt. However, you must make timely payments to ensure your credit score is not affected. This is one of the common mistakes when people choose an investment property.
Enhance financial management prowess
Investing early makes you responsible for managing and handling your cash flows efficiently. Irrespective of whether you invest in a residential property to earn rent or invest in a commercial property, you need to handle the investments. This will encourage you to enhance your financial management skills and tackle any problems in a responsible manner.
There are several types of properties you may invest in. When you are young, you have plenty of time to research and accumulate as much knowledge as possible. Moreover, you may use technology to conduct your research and make an informed decision about the type of property you would like to invest in.
You need to consider certain factors such as your income, expenses, existing debt obligations like student loans, and investment purpose before you choose to invest in real estate.
Property investment at an early age has several advantages especially when you are older. Although there may be some challenges, the power of compounding increases the value of your investment in an apartment several times over the years.
Invest today and achieve your dream.