Wealth Guide: When retirement approaches, people usually don’t know how to invest hard-earned money? Most retirees tend to invest in plans where regular monthly income can supplement their pension (if any). From mutual funds to monthly income plans to gold, there are plenty of options. One of these options is to invest the accumulated wealth in the purchase of a second home. Suren Goyal, Partner – RPS Group, shares her insights on real estate investing and answers if you’re buying a second home instead of planning for retirement.
“It has become one of the most popular investment options these days as property value is said to increase over time. The following factors support investment in a second home,” Suren Goyal suggested .
Regular rental income
“Regular rental income is a big plus with real estate investments. While you are in the dilemma of investing the corpus in a fruitful instrument, the second home tops the list due to its ability to generate income. investments in gold or mutual funds are less likely to generate as much monthly income as that of a rental property.This income coupled with your retirement will be a double benefit for the retiree,” he said. .
“In most cases, the value of the real estate investment increases over time, as does the rental potential. If the cost remains the same, the increase in rents is an additional source of income for you. Even if the person is on a home loan, the monthly rent will cover the lower EMI. Once the loan is fully paid off, that rental is your pure income. However, if you opt into other retirement plans, the chances of getting High yields carry high risk because these instruments are usually linked to the stock market. Exposure to very high-risk instruments can be dangerous in this age group,” he added.
“Purchasing a second home comes with additional tax advantages. Investing in a second home enjoys tax advantages under Section 80C and Section 10(10A) of the Act of income tax.Although other investments of retirees are also covered by these articles.For example, the purchase of a house guarantees the benefits under Article 80 C, because it offers advantages on the principal amount of the mortgage In addition, the interest paid on the mortgage also qualifies for tax deductions under Article 24. It should be noted that while you are buying a second home, you can claim a deduction of Rs 1.5 lakh on the principal amount of the home loan and Rs 2 lakh on the interest payment under Sections 80C and 24B respectively,” he said.
“While you’re in your fall years, a second home can be a solid asset. With rising levels of inflation, rental income and rising property values can act as a cushion against emergencies. “Although some retirement plans offer to provide a lump sum for your children in your absence, a second home can be a solid asset in the event of a contingency. It can also be sold if the need arises,” said he explained.
Walk with caution
“Having listed the advantages of a second home, it is also advisable to proceed with caution when buying a second home. You should try to buy a second home at least 10-15 years before your retirement so that you can comfortably pay for EMIs. In addition to this, it is also advisable to take the help of a professional financial planner. This way, you would be able to assess the impact and changes in your portfolio. Investment in a second home should also be backed by proper research.Property purchased in a prime location or close to markets will yield better rental returns than one purchased in a remote location. it is planned and executed correctly, buying a second home for retirement can be a very smart move,” he concluded.
(Disclaimer: Opinions/suggestions/advice expressed here in this article are investment experts only. Zee Business suggests its readers consult their investment advisors before making any financial decisions.)