As the age-old mantra goes, ‘Money makes money’, one needs a significant amount of capital to ensure monetary gains in the future. There are many sectors that one can invest in including business, banking, stock market, retail, rental, etc. The returns and investment capital vary from industry to industry. However, we are always on the lookout of an investment option which promises high returns at medium risk.
With that in mind, here are some investment areas that promise high returns:
- Hold and Sell
Perhaps the oldest and simplest areas of real estate investment! Under this, one needs to buy a property, wait for a considerable amount of time and then sell it. The earnings are one-time and deferred. Depending upon the appreciation in the price of properties in an area, the returns can range from moderate to high. It usually takes a minimum of 5 years for the property’s cost to appreciate but 10-15 years are a must for the property value to appreciate substantially.
- Properties for Rent
This one is of the simplest of all real estate investments. Under this, one needs to buy a property and then rent it out in return for monthly payments. The earnings are periodic and immediate, and the only drawback is that it may take five or more years to recover the capital.
Location is of prime importance here. It would always be profitable to buy 2 BHK in Thane, then to buy 4 BHK in Palghar for renting purposes.
- Fix and Sell
Another great investment option is to buy a dilapidated or abandoned property. Hire an agency to renovate, remodel and reconstruct it and then sell the ‘fixed’ property. The earnings are one time, and the period of recovery of the invested capital is limited to the time taken to fix the property, usually less than a year. However, such projects require a high amount of capital investments.
- Real Estate Mutual Funds or Real Estate Investment Trusts
REMF/REITs are equivalent to traditional mutual funds where several people pool their money and lend it to construction corporations in exchange of a periodic income on the amount invested. Projects at prime business locations such as – new projects in Goregaon, new projects at Worli, new projects at Ghatkopar should be on the watch list of the investor. The returns may not be as high as the areas mentioned above, but they are consistent.
Some popular REMF/REITs in India are – JM Financial Real Estate Fund, Piramal Real Estate Mutuals, Blackstone Property Mutuals, Axis Real Estate Funds, and others.
- Real Estate Exchange Traded Funds (ETFs)
ETFs are traded on the stock markets like Sensex or Nifty. The difference between ETFs and Mutual Funds is that in the case of ETFs, the investor can buy/sell their positions almost instantaneously by himself rather than by contacting the handling agency mutual funds.
Some popular ETFs in India are – Aditya Birla Real Estate Fund, Event Horizon Realty Fund, HDFC Property Fund and ICICI Opportunities Real Estate Funds, among others.
To conclude, these are the four areas that promise high returns, although they certainly carry an element of risk. The selection of a particular area depends upon one’s experience, knowledge, capital availability, and time. In any case, any of the above regions provides far better returns than simply traditional banking methods like FDs, PPFs, and others.