Long Term Vs. Short term: The best choice for real estate investors


The Union Budget of the year 2014 brought stability and signs of improvement in India’s real estate market. It opened doors for a safe property investments in almost all states of India.

While volatility is a common thing in nearly every state, Pune market has shown a constant stability. According to Insite, a quarterly report by 99acres.com, a Property in Pune guarantees an increase of 4% in the capital value.

Thus having a property in Pune becoming the latest trend.

For investors, the real estate market of Pune has been very fulfilling in terms of returns. However, the question of whether to invest in short term or long term property still lingers. It becomes even more important when the volatile past records of the market are considered.

The answer to this question depends entirely on the investor. Their goals, cash reserve, etc. play a pivotal role in this decision.

Let’s still look into the key points that helps in making this choice.

1.    Quick returns

The chance of getting quick returns is higher in a short term investment. By definition, short term investment means Buy-Renovate-Sell. The quick selling of properties help in getting quick returns. The return you get in the back of a long term investment is only after minimum 3 years.

2.    Level of risk

Risk associated with short term investments is generally higher. As not much time is given to hold a property, the risk of getting lesser returns can be expected. The investor doesn’t normally wait for the market condition to change, thus selling the property off even in recession.

In case of long term investments, risk of sudden change in the market is low; you can always hold the property a little longer. (The image shows the prices for the mid income houses segment. For long term investors can hold a property in either of this places considering the present range.)

3.    Cash backups

The amount of cash that you hold should be higher in flip investments. Renovation stage is very crucial in this type. Thus, you will need quick money to work on the property so as to sell in a short period.
Having ready cash is not a prerequisite in long term investments, as you will be holding the money.

4.    Type of residential developments

If you are going for a short term investment, choose developed localities/ projects. This will ensure quick sale and higher return. If long term investment is your thing, opt for under construction or new projects. It will make holding the property easier for you.

5.    Location importance

The importance of locality that is on high demand in the present time, is more important in case of flip investments. You can wait for the locality to develop in case of long term investments. In Pune, areas like Shikrapur on Nagar Road, Lonikhand, Sanaswadi, Talegaon Dhamdhere, and Shirwal in Satara are prime industrial hubs. But, these areas are presently seeing some prime affordable housing development by developers like Pratham Developers, Star City, Maple, and CFP. The demand among investors is great owing to the easy on pocket quotient of these launches.

Portfolio: The third option

The investors have a third option, from long term and short term investments – Portfolio.Replace ‘or’ with ‘and’. Instead of choosing between long term and short term investments opt for both.Use the returns from your long term property in Pune to do flip investments. This will help with the cash inflow and will lower the risks at the same time. To make the most of your 1 or 2BHK property in Pune, put in on rent.

The ultimate decision of which type to opt for, depend on the individual investors. But, a detailed research is indispensable in all the cases.

Tripti writes on the behalf of 99acres.com. Her articles talk about new developments in the real estate industry. She is an avid fiction reader, craftsman and a keen observer. Being someone who just observes without having a point of view, she keeps herself updated in real time. You can reach her on G+ and LinkedIn.

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5 years ago

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