Pros and cons of investing in residential real estate

why it is good option ?

In current market taking any investment decision in real estate is usually a difficult one, especially when it comes to choose between residential property and commercial property.
The decision on what to choose is all the more difficult someone who is new to investing in real estate due to not have more clarity on which is good property to invest.It is usually perceived that investing in real estate is for big investors and businessmen. Although it may be true to some extent, it is not always the case and residential property especially Luxury property can be invested in by even salaried people. While investing in residential property or commercial property can be a totally different ballgames, one must be very clear as to how the investment has to be made and how much involvement can the investor give after the investment is made. We take a look at pros and cons of residential property. Now a days you can start your investment with Rs.20 Lacs where you can get Rental In Come of Rs.10,000 per month in Pre-leased properties

INVESTMENT advantages of residential property

Rental Income – The only advantage of Residential Property is its Rental income if you are not utilizing this property. Which is depends upon locality of your property.

Affordable – if you compare cost of residential property with commercial property the cost is almost half of the cost of commercial property.

Tax Benefit: If you have purchased property on loan the you can have tax saving advantage on residential property but it depends upon tax slab.There is tax rebate or tax benefit on the EMI for repayment of loan for acquiring the residential property.There are significant tax breaks for EMIs paid for residential property. This break brings the overall cost of acquiring a residential property down and is one of the major reason people prefer residential property.

Less investment: When you evaluate the pros and cons of Residential real estate, one of the biggest advantage is that it requires less investment compared to Commercial property. There is an involvement of a heavy amount in case of commercial property than in case of residential property.

Lower Interest loans: The loans for residential property property are lower than commercial property. Which is a big advantage between the pros and cons residential property. The interest rates and terms and conditions will also depend on the kind of property, investors’ profile, location and the tenure of repayment. But it is safe to say that the interest rates will be less basis in case of residential property. The process of availing the loan is also easier and if your CIBIL score is good in sanctioning the loan is easy for any Bank.There are significant tax breaks for EMIs paid for residential property. This break brings the overall cost of acquiring a residential property down and is one of the major reason people prefer residential property.

No More road bumps in finding a tenant: One of the advantage when it comes to pros and cons of buying residential property is finding the right kind of tenant for residential property is easier than finding a tenant for commercial property. The property will not remain vacant longer when one tenant moves out and another comes is because of demand

Low Maintenance Cost: In the case of a residential property, the maintenance expenses are limited to simple (tap repairs, minor electrical works, etc) fixtures and do not involve a huge cost. The maintenance or renovation in a residential set up will low in cost. Renovation can be availed at the same rate of interest as the home loan if the two loans are being taken together.

Easy to find options: As most of cities are developing vertically and horizontally due to demand in residential requirement. Developers are coming with Township projects where you will get all amenities at place like an Urban Town. You have multiple options to choose from. It is easy to compare due availability of inventory as per your budget.

Pre-Leased property Investment options in Market: This is most trending options available in real estate where if you are looking for purely investment. this is safest way to earn Rental Income for longer period of time like minimum 10 years with fixed incremental rental. There are options available in market where you can start your investment with Rs.20 Lacs and can earn approximately Rs.10000 Rental per month. The advantage is that you do not have to find Tenent the managing company will appoint tenant on his own risk. Where you can earn 6% ROI.

DISadvantages of residential property

Lower rental income – When it comes to knowing about advantages and disadvantages of residential property, start with comparison on what gives less rental income. The rental yield in commercial property is higher than in residential property which acts to its advantage. In fact, rental yields from commercial property beats residential property hands down. The yield is usually in double digits from commercial property. This is the single largest advantage of investing in commercial realty estate. Sometimes, it can even be 12-14 percent if the location and condition is good. If the investment is being made solely from the point of view of earning potential through rents, then commercial property is undoubtedly better.

Irregular Inflow of Income-The income from residential property is usually not regular and not consistent in the case of residential property. This is one of the disadvantages when you compare cons of residential real estate. Residential properties are fraught with a bit of uncertainty in terms of longevity of lease or rental duration. The property are rented with agreement of 11 months which is shorter period of time but In case of commercial property, the rental is somewhat assured as there is longer lease duration.

Huge Investment in furnishing cost: One of the disadvantages of residential real estate investment when it comes to pros and cons of buying residential property is the cost furnishing. This is because once you have to rent it to a tenant with furniture .The furnishing costs will have to born by Owner. AS an investor, you have can give your tenant furnished property for better Rent.

Wear and tear of Property :In most of cases it has observed that the tenant do not maintain property because of that every year you have invest on repairs and replacement. One more disadvantage is default of rent as more of tenant do not pay rent on or even some cases they default and runaway without informaring