Easy Fin Tips

Tag: Financial Education

  • What are the Advantages of Investing in Multiple Properties [ Real Estate] ?  

    Real Estate is a traditional method for investing and accumulating wealth over the long run. Most people around us with good financial knowledge or without financial knowledge choose real estate investment as the most secure method. [ They usually compare the risk of investing in plots or apartments with investment  in the stock market, which is highly volatile].

    But, as with all investments, investing in real estates also comes with its share of risk. Factors like bad economic conditions, pandemics (like corona), market fluctuations specific to property, and tenant related risks could impact the returns  from the property. In some cases you should even face financial losses.

    To reduce the risk Investors often opt to diversify their portfolio of properties. Simply by investing across various locations, asset types and markets it is possible to maintain a balanced real estate portfolio.

    Diversification is a crucial risk management strategy that guarantees steady income, minimizes exposure to market volatility. Moreover it boosts your financial security with steady cash flow from multiple resources.

    The idea of investing in multiple properties is among the most efficient ways to lower risk and guarantee longevity of financial stability in the real property. It is as simple as the popular quote “don’t put all eggs in a single basket”. It is recommended for investors to buy  different types of properties in different areas,  to shield themselves from market declines and tenant vacancies.

    Another major advantage of having multiple properties is related to “TAX”, which we will discuss later.

    Investors should not depend on One Area / Location While Investing

    Real estate markets differ based on region due to factors like the growth of employment, economic development, infrastructure and whether it is in an urban or semi urban locality . If an investor owns a  property in a city [ if you go at micro level like investing in real estate properties in a popular area within the city ] they are completely vulnerable to market risk.

    If one region is facing an economic slump or stagnation in such cases your investment in  properties in other areas remain in good shape. They assure you a stable and secured income.

    This method of investing guarantees you  protection  against area specific disasters and policy changes. 

    Now lets see what are the Advantages of Investing in Multiple Properties [ Diversification ]

    Advantages of Investing in Multiple Properties

    1.  Market Fluctuation Protection

    Like all investment, real estate and rental income from properties also shows instability in its performance, if there is any slump in the economy. Values of real estate and demand for rental fluctuate based on the local economic condition. Your investment should be diversified into various types of property i.e. residential commercial, commercial and vacation rentals, etc. If you follow such a practice in investing in real estate property, you are literally creating a cushion for Market Fluctuation.

    Commercial and residential properties don’t always move in tandem. If one market is struggling the other could protect or save you. It’s like a hedging concept in trading.

    1. Continuous Cash Flows as rental income

    One of the greatest dangers of investing in real estate is the loss of rental revenue due to changes in market conditions or tenant vacancies. Multiple properties provide diverse income streams, ensuring consistent cash flow.

    Even if one of the properties remains empty, other properties remain generating rental revenue. This strategy guards against financial losses in case of no tenant or non-paying tenants.

    1. Rental Risk Management 

    When you are relying on one rental property as a major income source, one bad tenant or a prolonged vacant period can create a huge financial burden. 

    Investing in multiple properties can help investors diversify risk for tenants, thus reducing the risk of a single troublesome tenant.

    If you follow this method a single tenant’s default would not significantly impact the overall cash flow of yours.

    1.  Protection Against Economic Downturns 

    The economic slump or stagnation affects different real estate industries in different ways. While one industry may see lower demand, others could be stable or even increase. A well-diversified property portfolio mitigates financial losses during such marketic conditions.

    In general Residential properties remain stable even during economic slowdowns. But if you observe commercial real estate , chances of it struggling are very high. So having a balanced portfolio is recommended to reduce financial losses.

    1. Better Loan & Financing Opportunities 

    Possessing multiple homes boosts  your chance of obtaining better loans for future investments.

    You can use the existing properties as collateral purchasing new properties. Moreover Banks can offer loans for decent interest rates for investors who have several assets.

    Investors can refinance their old loans with lower interest rates as their property portfolio expands.

    1. Long-Term Wealth Accumulation 

    The value of real estate has historically increased in value, which means that multiple properties can increase the value of an investor’s net worth in the course of time.

    Different markets appreciate at different speeds having multiple properties boosts your chance of gaining from the growth areas.Real estate is like an insurance against inflation, which directly ensures the accumulation of wealth.

    Investors have the option of selling high-value properties at the right time to earn maximum profit.

    1. Tax Benefits & Deductions 

    Possessing multiple properties offers substantial tax advantages, which allows investors to cut down on their tax liability by deducting. Investors can claim depreciation for properties, which reduces the tax-deductible income.Costs like maintenance and home repairs and insurance are tax deductible.The losses from a property may be offset with gains from another property to lessen tax burdens.

    Conclusion :  That’s it from our end on “  Investing in Multiple Properties”.  We have covered all the advantages of following diversified investing in real estate. If you guys have any suggestions, please do let us know in the comments section. In our upcoming blog posts we will see more about investing in stocks and other instruments which could appreciate wealth in the long run.

  • Basic Financial Education for Children [ Teach Kids about Money ]

    Most people don’t know about the importance of letting their children know about “Financial Education” at an early age. Like all other subjects i.e. Math’s, Science and Learning Mother tongue , having extensive knowledge about money is a must for every student. Parents and teachers should consider this as one of the most important “Life Lessons” and they should patiently induce the concept of money in young minds.

    Having a strong and trenchant financial skill helps in addressing the issues related to money like money management,  needs vs want, and handling the stress related to financial issues. In today’s world, Money is the ultimate ruling factor so having a good knowledge on money is a necessity. Whether it’s a business or personal life, money plays a crucial role and people having it in good amounts enjoy some privileges in our society like getting respect etc. 

    We all know that Children curious about everything around them. If they observe their parents using credit cards, cash and electronic payments that may trigger a curiosity among kids to know more about them. But without proper guidance it is not possible for kids to know about money and the basic queries related to it like earning money, saving, charity and spending. Financial literacy provides children with the necessary skills on budgeting, saving and investing for the future.

    Why is Financial Education so crucial ? 

    a)  Children who are taught about money in the early years establish better saving and spending habits. These habits help them in maintaining financial discipline in their adulthood.

    b) In the real world everything directly or indirectly depends on Money. With proper financial education we are preparing children to face real-world financial challenges. This knowledge about money will help kids to stay out of debt traps later on in life.

    c) It is the responsibility of parents and teachers to make children know about the difference between needs and  wants. With good financial knowledge they don’t need anyone’s help in spending money on “needs vs wants”.  They can make decisions independently and this boosts their confidence in money Management.

    How to Teach Kids about the Basics of “Money” ? 

    First and most important step is to let the children know the “meaning of money and how it’s earned”. Without knowing these basics, they may not understand the terms like savings, spendings etc.

    It is the parents responsibility to make children understand the fundamentals of money. Later on this knowledge can help you in making responsible financial decisions among the superfluous available.

    Explain to kids about different types of cash like coins, notes, credit cards and Debit cards and later ask them to identify and compare. Explain how the cash can be used to buy things.

    How Money is Earned  ?

    Make sure children understand that “Money has to be earned”. Explain to them in simple words that to earn money they have to do a job [ doctor, engineer, Teacher] or business or any other hustle. [ Don’t complicate it by explaining with examples they don’t understand].

    To make children practically know about money and work, Parents could give children a small amount of money for completing tasks, such as doing their own laundry or helping with the garden.

    Now comes the actual part “Saving”.. Till now they have learned what cash is and what they have to do to get it.

    Money Management :

    Earning money is important but handling it responsibly is even more important. Again it is teachers and parents responsibility to teach Kids on how to manage money earned effectively.

    Explain children to divide their earnings into 2 parts a) Savings b) Spendings

    Explain to them about Savings and Spendings in simple language, so that these things get etched in their minds.

    a)  Saving

    Saving means keeping a part of the earned money for future use without spending them at once. They may not understand at first but with time they will come to know the importance of saving.

    Explain to them about “piggy banks or a savings jar” in which they can keep the remaining cash after spending.

    b) Spending

    Spending is nothing but using money to purchase things that we need / want . Again here comes another subject, the difference between “needs” and “wants”.

    Again as a parent you should play your role in making Kids understand the difference between “needs” in contrast to “wants”.

    You can use basic examples to make them understand like food, books come under needs whereas toys come under wants.

    Conclusion : Financial Education is a very important life skill every child/ Kid should learn at an early age and it is their parents responsibility. In this blog post we have covered basics about financial education for kids like “importance of money”, “importance of spending and saving money”. In our upcoming blog posts we will cover more about Savings and  Money Management related topics for Children and for students.