Buying and owning real estate is an investment strategy that can be both satisfying and lucrative. Unlike stock and bond investors, prospective real estate owners can use leverage to buy a property by paying a portion of the total cost upfront, then paying off the balance, plus interest, over time.

What makes a good real estate investment? A good investment has a high chance of success, or return on your investment. If your investment involves a high level of risk, that risk should be balanced out by a high possible reward. Even if you choose investments with a high probability of success, though, that isn’t a guarantee. You shouldn’t put money into real estate—or any other investment—if you cannot afford to lose that money.

Though a traditional mortgage generally requires a 20% to 25% down payment, in some cases, a 5% down payment is all it takes to purchase an entire property. This ability to control the asset the moment papers are signed emboldens both real estate flippers and landlords, who can, in turn, take out second mortgages on their homes in order to make down payments on additional properties. Here are five key ways investors can make money on real estate.

KEY TAKEAWAYS

• Aspiring real estate owners can buy a property by using leverage, paying a portion of its total cost upfront, and paying off the balance over time.
• One of the primary ways in which investors can make money in real estate is to become the landlord of a rental property.
• People who are flippers, buying up undervalued real estate, fixing it up, and selling it, can also earn income.
• Real estate investment groups are a more hands-off way to make money in real estate.
• Real estate investment trusts (REITs) are basically dividend-paying stocks.

1. Rental Properties

Owning rental properties can be a great opportunity for individuals who have do-it-yourself (DIY) renovation skills and the patience to manage tenants. Properties can be local, or there may be good out-of-state opportunities. This investing strategy does require substantial capital to finance upfront maintenance costs and to cover periods when the property is empty or when tenants do not pay their rent.

Pros

• Provides regular income and properties can appreciate
• Maximizes capital through leverage
• Many tax-deductible associated expenses

Cons

• Managing tenants can be tedious
• Potentially damage property from tenants
• Reduced income from potential vacancies

According to U.S. Census Bureau data, the sales prices of new homes (a rough indicator for real estate values) consistently increased in value from the 1960s to 2007, before dipping during the financial crisis.1 Subsequently, sales prices resumed their ascent, even surpassing pre-crisis levels.23 The long-term effects of the coronavirus pandemic on real estate values remain to be seen.

2. Real Estate Investment Groups (REIGs)

Real estate investment groups (REIGs) are ideal for people who want to own rental real estate without the hassles of running it. Investing in REIGs requires a capital cushion and access to financing.

REIGs are like small mutual funds that invest in rental properties.5 In a typical real estate investment group, a company buys or builds a set of apartment blocks or condos, then allows investors to purchase them through the company, thereby joining the group.

A single investor can own one or multiple units of self-contained living space, but the company operating the investment group collectively manages all of the units, handling maintenance, advertising vacancies, and interviewing tenants. In exchange for conducting these management tasks, the company takes a percentage of the monthly rent.

A standard real estate investment group lease is in the investor’s name, and all of the units pool a portion of the rent to guard against vacancies. To this end, you’ll receive some income even if your unit is empty. As long as the vacancy rate for the pooled units doesn’t spike too high, there should be enough to cover costs.

Pros

• More hands-off than owning rentals
• Provides income and appreciation

Cons

• Vacancy risks
• Fees similar to those associated with mutual funds
• Susceptible to unscrupulous managers

3. House Flipping

House flipping is for people with significant experience in real estate valuation, marketing, and renovation. House flipping requires capital and the ability to do, or oversee, repairs as needed.

This is the proverbial “wild side” of real estate investing. Just as day trading is different from buy-and-hold investing, real estate flippers are distinct from buy-and-rent landlords. Case in point—real estate flippers often look to profitably sell the undervalued properties they buy in less than six months.

Pure property flippers often don’t invest in improving properties. Therefore, the investment must already have the intrinsic value needed to turn a profit without any alterations, or they’ll eliminate the property from contention.

Flippers who are unable to swiftly unload a property may find themselves in trouble because they typically don’t keep enough uncommitted cash on hand to pay the mortgage on a property over the long term. This can lead to continued, snowballing losses.

There is another kind of flipper who makes money by buying reasonably priced properties and adding value by renovating them. This can be a longer-term investment, and investors may only be able to take on one or two properties at a time.

Pros

• Ties up capital for a shorter time period
• Can offer significant returns

Cons

• Requires a deeper market knowledge
• Hot markets cooling unexpectedly

4. Real Estate Investment Trusts (REITs)

A real estate investment trust (REIT) is best for investors who want portfolio exposure to real estate without a traditional real estate transaction.

A REIT is created when a corporation (or trust) uses investors’ money to purchase and operate income properties. REITs are bought and sold on the major exchanges, like any other stock.6

A corporation must payout 90% of its taxable profits in the form of dividends in order to maintain its REIT status. By doing this, REITs avoid paying corporate income tax, whereas a regular company would be taxed on its profits and then have to decide whether or not to distribute its after-tax profits as dividends.7

Like regular dividend-paying stocks, REITs are a solid investment for stock market investors who desire regular income. In comparison to the aforementioned types of real estate investment, REITs afford investors entry into nonresidential investments, such as malls or office buildings, that are generally not feasible for individual investors to purchase directly.

More importantly, REITs are highly liquid because they are exchange-traded trusts. In other words, you won’t need a real estate agent and a title transfer to help you cash out your investment. In practice, REITs are a more formalized version of a real estate investment group.

Finally, when looking at REITs, investors should distinguish between equity REITs that own buildings and mortgage REITs that provide financing for real estate and may also invest in mortgage-backed securities (MBS). Both offer exposure to real estate, but the nature of the exposure is different. An equity REIT is more traditional in that it represents ownership in real estate, whereas the mortgage REITs focus on the income from real estate mortgage financing.

Pros

• Essentially dividend-paying stocks
• Core holdings tend to be long-term, cash-producing assets

Cons

• Leverage associated with traditional rental real estate does not apply

5. Online Real Estate Platforms

Real estate investing platforms are for those who want to join others in investing in a bigger commercial or residential deal. The investment is made via online real estate platforms, which are also known as real estate crowdfunding. This still requires investing capital, although less than what’s required to purchase properties outright.

The best real estate crowdfunding platforms can pool resources of investors looking for investment opportunities with other investors looking for financial backing for new or current real estate projects. Thereby giving you the opportunity of diversifying your investments with not much money.

Pros

• Can invest in single projects or portfolio of projects
• Geographic diversification

Cons

• Tend to be illiquid with lockup periods
• Management fees

Why Should I Add Real Estate to My Portfolio?

Real estate is a distinct asset class that many experts agree should be a part of a well-diversified portfolio. This is because real estate does not usually closely correlate with stocks, bonds, or commodities. Real estate investments can also produce income from rents or mortgage payments in addition to the potential for capital gains.

What Is Direct vs. Indirect Real Estate Investing?

Direct real estate investments involve actually owning and managing properties. Indirect real estate involves investing in pooled vehicles that own and manage properties, such as REITs or real estate crowdfunding.

Is Real Estate Crowdfunding Risky?

Compared to other forms of real estate investing, crowdfunding can be somewhat riskier. This is often because crowdfunding for real estate is relatively new. Moreover, some of the projects available may appear on crowdfunding sites because they were unable to source financing from more traditional means. Finally, many real estate crowdfunding platforms require investors’ money to be locked up for a period of several years, making it somewhat illiquid. Still, the top platforms boast annualized returns of between 2% and 20%, according to Investopedia research.

The Bottom Line

Whether real estate investors use their properties to generate rental income or to bide their time until the perfect selling opportunity arises, it’s possible to build out a robust investment program by paying a relatively small part of a property’s total value upfront. And as with any investment, there is profit and risk with real estate investing and markets can go up as well as down.

For more details contact us at www.chandigarhproperty.in

Manufacturers and IT industries play a pivotal role in boosting Chandigarh’s economy. This city’s industrial belt stretches over an area of approximately 1262.14 acres approximately. This belt is divided into two plots- Phase 1 and Phase 2. This city is a fully developed area with 1966 plots dedicated to industrial development.

Its economic development and infrastructure make Chandigarh one of the most expensive real estate markets. As such, investments in commercial real estate can be quite lucrative.

Top Reasons to Invest in Chandigarh Real Estate

Here are a few reasons for you to consider investing in commercial real estate in Chandigarh:

• Transportation

Wide and well-maintained roads cover the city of Chandigarh, offering easy transportation to everyone here. Expressways like NH 5, NH 152, and NH 7 connect Chandigarh to other main cities of Punjab and neighboring  states. 

Furthermore, the Chandigarh Junction offers excellent rail connectivity to other regions of India. 

• Booming IT hub

Owing to overpopulation in neighboring  cities, major information and technologies are shifting to Chandigarh. This enhances employment opportunities in this region.

Chandigarh Administration has set up the Society for Promotion of IT in Chandigarh (SPIC) to attract more IT sectors to this city. Therefore, there will always be a demand for urban office spaces in Chandigarh to fit the needs of these big and small companies. 

• A Clean City

All public properties in Chandigarh, including buses, bus stops, roads, and parks, are clean and well-maintained. As the earliest fully-structured city, all localities here are designed systematically. 

Purchasing commercial properties here, like office spaces or plots for resorts, will help you earn a substantial return on investments. 

Also Read: Guide for New Chandigarh Commercial Real Estate Investment

Commercial Real Estates Opportunities to Invest in Chandigarh

Here are some locations in Chandigarh you may consider while investing in commercial properties in this region:

• Zirakpur

Zirakpur is a small town situated near the Chandigarh-Ambala highway. You can also access Zirakpur via the Patiala-Shimla highway. This satellite town of Chandigarh opens up opportunities to earn high revenues through commercial real estate investments. 

Zirakpur houses well-maintained office spaces and properties for retail stores. Orbit Signature Walk and Motia’z Royal Business Park are prominent office spaces here. Similar business parks and mall projects are being developed, promising an urban office-culture outlook. 

The rent for commercial properties in Zirakpur ranges from approximately ₹31 lakh – ₹1.45 crore. 

• New Chandigarh

New Chandigarh stands out as Punjab’s first smart city. It houses many residential complexes, business parks for upcoming IT companies, and parks and lakes to attract tourists. 

A Singapore-based company has laid down the master plan to redesign New Chandigarh. This city strikes a balance between nature and urban infrastructure. Therefore, it is also famous as Eco City. 

The price for commercial properties in New Chandigarh ranges from ₹41 lakh to ₹4 crore approximately. This means that there are chances for high ROI from commercial properties in New Chandigarh.

Things to Consider before Buying Commercial Property in Chandigarh

Here are some points you need to consider before investing in commercial real estate in Chandigarh:

• Location and Connectivity

Before investing in a plot or property, consider researching its location and proximity to railway stations and airports. Location plays a major role in determining a property’s value among tenants. 

For instance, properties near educational institutions can work as prominent hostels or co-living spaces for students.

• RERA Authentication

The Real Estate Regularity Authority (RERA) Act 2016 monitors discipline and transparency in the real estate business. It mandates the formation of RERA authorities in every state to overlook transactions that happen here.

Every builder or broker in Chandigarh should register their properties under the RERA portal on Punjab’s official website. You can verify the authenticity of your shortlisted properties in Chandigarh there. 

• Builder

If you are planning to invest in an under-construction building, consider researching the builder’s past works and records of successful projects. Also, remember to cross-verify the data provided by the builder by contacting previous investors. 

• Lease Structure

A lease is a legal document that binds investors and builders under specific clauses. As investors, you need to have an elaborate idea of a lease structure. This will safeguard you from the risks of unforeseen situations. Also, having a clear idea of the lease document reduces the chance of the opposite party exploiting you with any loophole in its clause. 

Consider seeking help from a legal advisor to understand the lease structure before investing. 

Stamp Duty in Chandigarh

The table below displays stamp duty charges applicable to properties in Chandigarh:

Registration Fees in Chandigarh

Here are the registration charges for commercial real estate in Chandigarh

Also Read: Guide for Commercial Real Estate Investment

Chandigarh Commercial Real Estate- What’s the Forecast?

Chandigarh hosts manufacturing industries of auto and tractor parts, paper, sanitary fittings, steel fabrications etc. It is also growing as an IT hub. Taurus Agile, Wipro, Infosys, Erricson, Tech Mahindra and Reliance Communications are some of the IT companies that have set up their offices here.

After Phases 1 and 2, Chandigarh Complex Development Plan is taking the initiative to set up industrial zone Phase 3. This will open gates for more industrial development in Chandigarh. Furthermore, the strategic location of these industrial and business parks near National Highways offers scope to attract more investors to this city. 

New Chandigarh offers an uninterrupted power supply and many other facilities to support an elegant lifestyle. Moreover, the requirement for office spaces and retail stores offers endless scope for investment in this region. 

Commercial Real estate vs Other Assets

Given below are the differences between commercial real estate and other assets based on ROI. 

Commercial Real Estate vs Gold

Commercial real estate can earn a higher return on investments than gold. However, buying and selling gold is more accessible than commercial properties. Also, gold is a more liquid asset than commercial properties.

Commercial real estate vs Stocks and Mutual Funds

The stock market is highly volatile, and investors must understand this marketplace before investing. Here, investors can gain high returns if they can take high risks of losses. Whereas investing in commercial real estate in Chandigarh promises stable returns over time.

Commercial Real Estate vs Residential Real Estate

Commercial properties are more expensive than residential real estate, so the former yields higher returns on investment. However, finding tenants for commercial property is time-consuming. Also, investors are at higher credit risk with commercial properties than with residential real estate.  

Commercial Real Estate vs Bonds

Bonds have a more liquid market than commercial real estate. However, both are excellent sources of passive income. Bonds do carry lower risks compared to real estate investments.

The table below depicts the different asset classes based on their liquidity, volatility, ticket price, and risks.

Explore our homepage to find top-rated bonds trending in the market. Register now to invest with no hidden or additional charges. 

Steps to Invest in Commercial Real Estate in Chandigarh

Here are the steps an investor must follow to invest in commercial real estate in Chandigarh:

Step 1: Finalise your budget to invest in commercial properties in Chandigarh.

Step 2: Conduct thorough research on potential locations and properties to know about their future potential.

Step 3: Shortlist a few commercial properties that fit your budget.

Step 4: Opt for on-site research to closely analyse the property and its locality. Consider seeking help from a real estate advisor to learn about prospects in the area.

Step 5: Finalise a commercial plot or property that suits your budget and investment goals.

Step 6: Check the authenticity of documents like Title Deed, Foundation Certificate, and Property Assessment Extract provided by the seller.

Step 7: Complete the formalities regarding stamp duty and registration charges to transfer the property under your name.

Step 8: You need to pay service fees to brokers or real estate consultants for availing their services.

Step 9:  Cover your newly purchased property with an insurance plan. This will safeguard you from any major financial loss in case of any damage to your property.

Final Word

Chandigarh’s strategic design, environmental preservation and industrial growth have helped it achieve world-class status. This attracts several big and small industries to this city. Thus, investors will always have the scope to benefit from commercial real estate in Chandigarh. Before investing, investors should keep in mind to check the property’s location, age, registration and RERA compliance. 

Frequently Asked Questions

Why is it important to register my properties in RERA?

The Real Estate Regulatory Authority is set up to support transparency and uniformity in real estate industries. This body works to prevent fraud and project delays in real estate transactions. Every commercial and residential property owner must register their properties under the RERA portal of their respective states.

Is New Chandigarh a good place to invest in commercial real estate?

As a smart city, New Chandigarh is attracting several big and small firms to its heart. As a result, there is a growing demand for office spaces, banks, restaurants and hotels. Therefore, investors can invest in New Chandigarh to gain high ROI.

What is Stamp Duty?

Whenever an individual sells a property, he/she must pay a particular tax called the stamp duty. Section 3 of the Indian Stamp Act 1891 elaborately details stamp duty payable by property owners. Each state of India possesses different stamp duties. Therefore, a seller must pay this tax per the property’s location.

What are the prime areas in Chandigarh to invest in commercial properties?

New Chandigarh, Mullanpur, Zirakpur, VIP road and Dera Bassi are a few important areas for an individual to invest in commercial properties in Chandigarh.

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