Should you invest in real estate in Punjab this year? That’s a great question.
Mr. Singh from Property Ludhiana has some opinions on this.
A lot of people have a lot of different opinions about it. That’s questions given what’s happening in the marketplace right now– is the market going up or down, down or up? Are interest rates going up? Is that going to keep me from buying?
So should you buy or sell property in Ludhiana the year 2019, 2020? Well, a lot can happen between now and then.
But I will point to a brand-new study that just came out from Deloitte, which interviewed These are people who are buying up apartment buildings, buying big warehouses, and buying lots of single-family home structures as well because they’re buying multiples of these in one area. And the survey turned up really something pretty fascinating.
And I want you to really, really unpack this, if you will, because I think there’s a lot of ignorance in the marketplace right now as to what is happening in the investing real estate space. There’s a lot of different areas you can invest.
You could invest in new construction. You could buy REITs, which are R-E-I-Ts, Real Estate Investment Trusts. So you can actually buy into a stock that has real estate. That’s something I avoid like the plague. You could invest in single-family homes, which is what I do.
You could buy into big apartment syndications. You could do all sorts of things in real estate investing. But what they zeroed in on this study had to do with, to me, the difference between buying a tangible asset and an intangible asset like a REIT.
So these commercial investors were asked this question. Do you plan to increase your portfolio in 2019? Do you plan to buy more real estate next year and in the year after that? And guess what? back and said yes.
They plan to increase their portfolio over the next 18 months. That’s pretty remarkable. But interestingly, they said that if they had REITs or they were invested in REITs, they’re scared.
And they are ready to run for the hills. Run to the exits, in fact, was a couple of their words out of this study.
You’re buying into a fund which may have access and may be buying into real estate. So when you invest in real estate, you actually own a piece of property.
When you invest in a REIT, you’re buying into a stock which has real estate maybe in the stock. And they can sell out pieces of that stock and put things into that portfolio and move it out, move it in, move it out, move it in. And so you’re buying into that.
As the great Tom Wheelwright, one of the smartest tax accountants in the country, says why would you buy a REIT when you could buy actual real estate? You’re three steps removed from the asset when you buy into a REIT.
When you buy that single-family home, you own that performing asset. You have the deed to that property. When you own a REIT, you buy into a REIT, it can go down to $0 in value. And you have nothing. You have nothing to show for it.
So buying into a single-family home– way, way better. So 97% of these commercial investors said they were going to increase their position in real estate over the next year to two years, over the next 18 months. That’s remarkable.
Why? Why did they say this? Let’s dive into this study a little bit. They said– and I’m quoting now– “because prices are rising along with NOI growth.” They say the real estate cycle still has more room for growth.
And the pricing is attractive. And the risk of inflation is rising. Why is that important? Because real estate is often seen as a hedge against inflation.
Let’s put it in layman’s terms, OK? Because I’m not that bright. And I like to think of things in terms of a fifth-grade level when it comes to some of this stuff. And I’m not talking down to anyone. I’m talking down to myself more than anything.
But if you have a rupee and you hold it for 20 years, because of inflation, that rupee is not worth a rupee anymore. That rupee is going to be worth a lot less 20 years from now.
But owning real estate often increases in value anywhere between 3%, 5%– you go into some of those bubble markets perhaps in Mumbai– So the value of real estate rises– in fact, outpaces often– inflation.
Therefore, it’s seen as a hedge against inflation. So you’re putting money into a performing asset that’s also pushing off monthly cash flow to you. So go back to their quote. Prices are rising along with NOI growth, Net Operating Income.
And the real estate cycle has more room for growth. The pricing is attractive. And the risk of inflation is rising– again, a hedge against that. So amazingly, these REITs, which have seen this rocky road– a lot of them really took a big hit late in this year, late in the fall of 2018. And again, a lot of these investors saying they are running out of REITs and into real assets.
So should you buy real estate in 2019? That’s up to you. We’re talking about investment property here. I’m not talking about the home you live in. So if you’re thinking about buying a house to live in, that’s not what this video is about.
We are becoming a nation of renters. More demand for rentals than ever before. And if you’re buying smart, you’re buying below market.
You’re buying where you can get a high return on investment with steady, steady employment in these areas with good schools, which is what I like to buy.
Then you are making a smart investment. So you’ve got a high return on investment. You’ve got a stable performing asset that can never go down to 0 in value. Unlike your fiat currency rupee that you may have in your pocket or unlike your stocks that you may have invested in, real estate can never go down to 0 in value even if the house burns down.
You still own the land underneath it. And I hope you had insurance on the property because then you’ll get the property rebuilt at a replacement cost for having your insurance on that property. So that is the beauty of rental real estate.
So should you buy rental real estate in 2019 and beyond? Totally up to you. I know I will be doing that. Should you buy a primary residence to live in?
You know my thoughts about the home you live in. It is not a performing asset. A performing asset is something that puts monthly cash flow in your pocket. A home you live in does not, takes money out of your pocket every month.
So totally different discussion, a thought for another day. So do you plan to buy real estate in 2019? If you’re ready to take the plunge, let me know in the comments below. I would love to hear your thoughts about what your plans are, what you’re nervous about, and where you are going with your rental portfolio.