33.26 How do you make a Smart Real Estate Decision?

We covered that there are 2 types of residential real estate options:

Consumption purpose – For you to stay in.
Investment Purpose – To create income and wealth

This newsletter will focus on what type of real estate makes the most sense from an Investment Perspective.
The simplest way to look at it:

High Yield
High Returns (eg: Land Investments, Villa)

But that’s easier said than done.
So let's go one by one.

1. What constitutes a high yield?

A general rule that can be followed in purchasing any kind of property is the Yield Rule.

Yield as we discussed in the Rental income from your property.
For example: if you have purchased a house of Rs. 1 CR and you earn a rent of Rs. 4L/year, the rental yield will be 4%
According to the yield rule,

If you are making a yield of less than 4 % on any flat, then you should ideally NOT go for it.
If the yield is greater than 4 %, then that is a deal that you could consider.

But is this possible, It absolutely is.
But for this, you need to:

Buy at good prices
Set up a strong business on it.

We will dive deeper into this in future newsletters.

2. What will be your use case?

For instance, I recently bought an apartment in Goa. But I had my reasons.
What were they?

This apartment served multiple purposes.
It can be used as my office
Airbnb Rental Business can be run – when I need to
Holiday home (if I ever move out of Goa)

Such multiple uses of property also matter in deciding the location of buying the apartment.

3. What are your resources?

Do you have the time and money to buy a property and build on it?
If so that would make the most sense in terms of ROI.

But if you can’t, pick a property at the right price that you can monetize well. For eg: Run a short-term rental business.
These simple steps can help you determine what type of real estate works for you.
The idea is to find one you can sustain and take care of without any hassle.

Source

Akshat Shrivastava's 30 days Real Estate newsletter.