At What Age One Should Invest in Real Estate?

Buying a dream home is on the bucket list of most individuals! There are many factors that determine the right time to invest in Real Estate. Some of these factors include investment appetite, income levels, priorities and most importantly age. Age determines your home loan duration, your savings for the initial down payment and so on.

The decision to enter the real estate market at a young age is a bold one. To maximise investment and mitigate risks associated with real estate, young investors need all the help they can get. Young investors with their eye on property buying should keep abreast with the complex dynamics of the market. Before parking your funds in real estate, subscribe to online forums and publications to learn the ABCs of property investing.

Real estate is a long-term investment with its cycle of highs and lows. Youngsters looking to make a quick buck should think twice before investing in property as it does not yield instant returns. Often parents help with down payment or act as loan guarantors on the bank loan, but the rest of the journey has to be traversed alone.

Here is a look at three different age brackets and the advantages of each.

25-30 years

The purchasing power of youngsters is improving and with an active work life ahead of them, getting a long-term home loan is easy. Investing early on has its own benefits

• Tax benefits throughout the career
• With fewer responsibilities, paying EMIs is easier
• Property bought as an investment can reap benefits later
• The house can be an alternate income source if rented out

30-40 years

This is the age when most youngsters are on the onset of getting married and/or having a family. Here are reasons why many consider this age bracket to be ideal

• Sufficient savings to comfortably manage the down payment
• Besides tax benefits, compensation too is fairly better than when they started out
• Easier to get better home loan deals
• Investment can be planned jointly with the spouse

40+ years

Systematic investment planning throughout the career can help individuals buy a property at a later stage.

• May need a small home loan or no home loan at all
• Most other responsibilities are already taken care of
• Buying a house after living a loan-free life to the fullest
• Can choose a home with a retirement lifestyle in mind

If you think property investing could be for you, here are some investment tips:

1. Prepare your finances:- Prepare a document outlining your assets and all your regular expenses and take it along to your bank to see if it would be possible for you to qualify for an investment loan and how much you could potentially borrow.

2. Save that deposit:- Use a budget planner to work out where you can make savings, set a budget and stick to it. Work out how long it will take you to save for the deposit on an investment property and look forward to the day when you will reach your target!

3. Do your research:- Speak to the experts in these areas to ask their advice on rental returns and growth prospects in the regions you are researching. Get to know them, visit them in person if possible and they may alert you to suitable properties soon to come on the market that are not yet advertised.

4. Get your loan preapproved:- Once you have saved sufficient deposit plus costs for stamp duty and other additional expenses and are ready to make your move, revisit your bank or mortgage broker and get your loan pre-approved so you are ready to buy as soon as the right property comes on the market.

5. After purchase:- While you are waiting for settlement on your purchase, speak with the local property manager to arrange to rent out the property. He or she will carefully vet potential tenants and inspect your property on a regular basis.

Owning a property can provide a steady source of income for a young person and also offer him/her an insurance against any setback. However, exposure to property investment too early in life comes with some inherent risks.

Young investors may not be able to relocate in the interest of career if they are tied down to one location due to property investment. There is also the temptation to overshoot budgets, resulting in steep EMIs. Despite these risks, real estate remains a lucrative investment and a high-yielding asset class that continues to attract young investors.

This guest post has been written by Gunjan Johar.