How to generate passive income from real estate?

Invest in?real estate?to generate passive income from it.

Purchase commercial, industrial, or warehouse properties that provide you with a minimum 6% return.

Reconstruct a rundown property and put it on rent to earn more than 6% return o

The Four categories of real estate are residential commercial/retail, warehousing, and industrial.

You Should Invest in commercial, warehousing, or industrial property to get a minimum return of 6%.

A workforce hostel is a property let out to the employees of a near office after converting a property that is not in good condition into a hostel.

In the pooled property a company is appointed that manages the money of all the investors and every investor is allotted a Unit.

REIT is a formal method in which the big builders of India construct a property, put it on rent, and distribute the rent among the shareholders.

1: Real Estate

Real estate is defined based on the following four categories:

1. Residential

2. Commercial/Retail

3. Warehousing

4. Industrial?

2: Real Estate- Status

Its status can be any of the following:

1. Built

For example:

• House
• Farmhouse
• Flat
• Floor

2. Unbuilt

For example:

• Plot
• Farmland
• Under construction property

3. Real Estate- Expenses

Whenever you purchase a property, there are expenses involved in it.

For example:

You purchased a property costing Rs. 1 crore. You will need to bear the following expenses in this purchase:

• Stamp Duty:

It depends on the state in which your property is located. It is usually 6-8%. So it will be Rs. 6-8 lakhs on Rs. 1 crore property.

• Registration:?

it is 1%. So, it will be Rs. 1 lakh on Rs. 1 crore property.

• Brokerage:
• It is also 1%. So it will be Rs. 1 lakh on Rs. 1 crore property.
• GST:
• It is charged on the entire amount calculated above.
• Security charges
• Maintenance charges

Property is the only asset class for which you have to incur 10% of expenses for buying it.

So When you buy a property for Rs.1 crore you will incur expenses of Rs. 10 lakhs on it. But you will not able to sell this particular property for Rs 1.10 Cr just after buying it.

4. Real Estate- Returns

It is very difficult to calculate returns on the property because the location is one of the main factors in it.

You cannot find anybody who will say that it is possible to earn 5%, 10%, or 15% returns consistently on property.

Liquidity is also one of the difficult factors while calculating the returns on property.

For example:

• If you buy Rs. 1 crore property, then you can sell it only when a buyer approaches you.
• So, even your property is of Rs. 1 crore, 5 crores, or 10 crores, if you do not have a buyer, then your cash flow is zero.

5. Real Estate- Mindset?

Let us discuss the different types of mindset by which property is purchased by taking the example of Mr. Arpit Arora Uncles- Arun and Varun.

For examples:

• Uncle Arun is not able to purchase a property because he is not able to save money.
• Uncle Varun has been purchasing the property with the mindset that in long term the value of a property will increase.
• Appreciation in the long- term means you purchase a property and keep it with you for 10 years with the hope and aim to fulfill the goals of your family and children like daughter marriage, children education, etc.

Let us understand appreciation long-term mindset with the help of an example of property investment done by Uncle Varun in the last 9-10 years.

For example:

• Uncle Varun has purchased a property of Rs 1 crore in the year 2011.
• The present value of this property after appreciation is only Rs 1 crore 10 lakhs.
• He does not have any buyers for this property because not many people are ready to pay the said price.
• The buyer who is ready to purchase the property is giving only Rs. 85 lakhs.
• He is selling this property because he needs Rs 50 lakhs; but again the question is, what he will do with the remaining Rs. 35 lakh?

These are some of the problems that come with the appreciation long-term mindset.

6: Real Estate – Investment

You should invest in the following property:

• Commercial
• Warehousing
• Industrial

You should buy the above-mentioned properties with the help of a good broker and at a good location.

The rental yield of these properties should be at least 6% as this is the present market rate.

For example:

• A property of Rs. 1 crore will provide you a rental of Rs6 lakhs per year (or Rs.50,000 per month) at a rental yield of 6%. This rental is your passive income.
• Also, whatever rent you are receiving, you need to pay tax on only 70% rental, and the remaining 30% is exempted according to the standard deduction.

These are some of the benefits of investing in real estate.?

People who have experience in construction and property buying can do the following:

• Purchase a property at a discount that is in a very bad condition.
• Repair the property, so it is in good condition and convert it into rooms.
• This will help you create an income of more than 6% by providing the rooms on rent.

For example:

• OYO uses the same model to create an income source for itself.
• It purchases the properties in bad conditions, gets the property repaired to bring it in a good condition, lets out the property on a room basis, and earns income.

7: Workforce Hostel

• Nowadays, a new concept of workforce hostel has come.
• Builders/investors purchase a property in bad condition near an office and convert it into a hostel after maintenance
• In this hostel, office employees stay and not students.
• These employees give you rentals of more than 6%.

All the above are the different ways that you can use to earn passive income by a rundown property.

8: Pooled Property

Let us understand how you can earn income from a property when you do not have Rs1 crore for purchasing the property.

If you want to invest in a huge property of Rs.50 crores but you do not have even Rs1 crore, how will you invest in it?

You can invest it through a system known as pooled property.

In the pooled property, a company is appointed that manages all the investors’ money. This company allows a Unit to every investor and the investor will be the unitholder instead of the owner of an area.

In this system, you can save the property registration cost as the registration is not done.

Pooled property enables you to invest in a big property, Which is giving more than 6% passive income, but you are not investing the amount of money equal to the value of the property.

9: REIT( Real Estate Investment Trust)

REIT( Real Estate Investment Trust)

• This method is more advanced as compared to the pooled property method.
• ?REIT is a formal method in which the big builders of India construct a property, put it out for rent, and distribute the rent among the shareholders.
• You can also be a shareholder of such a property if you purchase REIT through the stock exchange.
• Nowadays REITs are giving more than 6% income.
• You can invest in REIT with Rs.1 lakh only.

10: Real Estate – Triggers

• You purchase the property only when get any of the following:
• Huge profit
• Bonus
• Huge Capital
• You have to trigger your mind when you get the money and purchase a property, Which creates passive income for you.

Massive Action Plan

• Assess your total property.
• Eliminate your home, office, and factory out of your property because you live in it or do business in it.
• Sell or restructure the properties that do not give you any rental income.
• Buy properties like a commercial, industrial, and warehouse that give a 6% minimum yield.
• Invest in pooled properties wherein you can invest with less amount.

By doing so, you will be able to enjoy passive income throughout your life.