Small Investors: EMIs, JIs & Private Money can make it possible!

As promised, here we go with our views on the next 3 options for small investors in real estate – Joint Investments, EMI options and Private Lending. You might be aware of these vehicles already, but we hope to add few extra points to your knowledge. So here we go:

1.       Joint Investments 

No awards for guessing what joint investments are! Consider this scenario - You and your friend want to invest in real estate, but are short on money. There is a lucrative property deal available which is sure to yield heavy returns; what to do now??

Yes, pool in money and share the property!

Pooling funds for Joint Investment

The above shown scenario is not very uncommon. Every now and then we come across people struggling with this issue, especially small investors. Joint Investments open up gates in such cases and investors can earn profits from the deal which otherwise they would have let go. Joint investments need not be in equal proportions, but it’s preferred so as to avoid any conflicts. Two or more people can join hands for an investment in different proportions and later enjoy the returns in the same ratio.

What is more important in this type of investment is clear agreement between different parties. Having a pre-signed agreement ensures that rights of all the parties are safeguarded and any possibility of conflict is minimised.

2.       Private Lending 

This may look like a new concept for some of our readers. The most common perception of Private Lending as soon as one hears about it is – “get a loan from private lender and go for your purchase”

WRONG!

Private money lending is actually the opposite of what common man perceives. It is giving ‘your money’ to investment companies to invest in real estate and return you your principal and a pre-decided interest portion.

Private Money Lending mechanism

This form of investment is relatively less risky in terms of returns and efforts to be put in by the first time investor. But sure, there are some other issues attached with this form of investing. Some of them may be:

a.       Credibility of the Investment firm

b.      No clarity on the ownership of the invested property

c.       No secularisation apart from the letter of deed

These issues can be mitigated if a proper analysis is done prior to selecting a private money investing firm.

 3.       EMI Options

Yes we know that it is very rudimentary to talk about EMIs. EMI is the most widely used concept today, not only in the field of real estate, but in almost every field. But more often than not, small investors fail to see its utility and neglects EMI as an option for investment.

Take an example of a young professional who wants to make an investment but is perplexed due to obnoxiously high RealT prices. As a result, he continues to reside in a rental apartment and invest in other vehicles like stock market. If planned and calculated properly, he can very well invest in a real estate property, making full use of available EMIs and resources otherwise invested in other investment vehicles.

Disclaimer: The purpose of our above analysis is to bring forth the channels of investment for small investors and make them aware of their in-and-outs. We are not advocating or recommending any of these methods. It is the rationale of the investor who has to take decision while making an investment choice.

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