What is the Ideal Time to Switch a Property Investment
Mar 07, 2017 Real Estate News
Real estate is one other most favoured sector by investors to invest their hard earned money. Investment in real estate property is always considered as a safe bet as most of the times it produces high returns to the investors. People buy under-construction properties at quite cheaper rates with the hope of selling them at higher rates after a few years.
Property investors tend to switch their investments from one property to the other from time to time. When someone finds a suitable price for their property, they sell it and invest the amount in other property. However, it is very crucial for the investors to choose the correct duration between switching of property investments. Statistics suggests that majority of the people invest in under-construction properties and normally sell them at the time of delivery of the project. This cycle usually gets completed in 2-3 years. Experts recommend that people should stop considering property as short term investment and should keep hold of the property for at least five years before eventually selling it to make a huge profit.
Tax computations depending on time of sale:
a) Short term capital gains: If the investor sells the property within three years of its purchase, the profits earned would fall under the short term capital gains category. The profits will be added to the investor’s income and are taxable as per the provisions of the Income Tax Act.
b) Long term capital gains: If the investor intends to sell the property after three years of its purchase, the profits earned in such situations would fall under the long term capital gains category. The tax would be levied at 20 percent of the total amount after indexation.
Investors search for the best opportunity to sell their existing properties in order to make a big switch to another property. As soon as the locality around the property gets developed, prices rise at a tremendous rate. Investors believe it to be the best time to make the profit on their properties. Selling of the property at the right time makes large capital available to the investor so that he/she may invest it in some other property.
The ideal time for switching investments in property is when you realise that the property won’t appreciate further and that its value will remain the same henceforth. In such cases, encashing on your existing property and diverting those funds to buy new property(which has potential for appreciation) is the best practice. You must consider tax implications before making the switch. Experts also suggest that you must conduct a thorough research of the new property and its surroundings to find out whether it will give you hefty returns in the future. If the expected returns are less than the existing investment, then, it can be concluded that there is no point in switching.
Property investors tend to switch their investments from one property to the other from time to time. When someone finds a suitable price for their property, they sell it and invest the amount in other property. However, it is very crucial for the investors to choose the correct duration between switching of property investments. Statistics suggests that majority of the people invest in under-construction properties and normally sell them at the time of delivery of the project. This cycle usually gets completed in 2-3 years. Experts recommend that people should stop considering property as short term investment and should keep hold of the property for at least five years before eventually selling it to make a huge profit.
Tax computations depending on time of sale:
a) Short term capital gains: If the investor sells the property within three years of its purchase, the profits earned would fall under the short term capital gains category. The profits will be added to the investor’s income and are taxable as per the provisions of the Income Tax Act.
b) Long term capital gains: If the investor intends to sell the property after three years of its purchase, the profits earned in such situations would fall under the long term capital gains category. The tax would be levied at 20 percent of the total amount after indexation.
Investors search for the best opportunity to sell their existing properties in order to make a big switch to another property. As soon as the locality around the property gets developed, prices rise at a tremendous rate. Investors believe it to be the best time to make the profit on their properties. Selling of the property at the right time makes large capital available to the investor so that he/she may invest it in some other property.
The ideal time for switching investments in property is when you realise that the property won’t appreciate further and that its value will remain the same henceforth. In such cases, encashing on your existing property and diverting those funds to buy new property(which has potential for appreciation) is the best practice. You must consider tax implications before making the switch. Experts also suggest that you must conduct a thorough research of the new property and its surroundings to find out whether it will give you hefty returns in the future. If the expected returns are less than the existing investment, then, it can be concluded that there is no point in switching.
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