Electronic income

Reasons why having a second income is important

If the past two years have taught us a lesson, it’s about the importance of preparing for uncertainty. As the global economy returned to normal after the unprecedented onslaught of COVID-19, supply chains and commodity prices around the world were challenged by the Russian invasion of the Ukraine.

In this climate of economic uncertainty, it is no exaggeration to say that we now live in a time when a second source of income is no longer an option but almost a necessity. Multiple streams of income can mitigate the risks of having all of its income come from a single source. While there are traditional ways of generating a second income, such as residential property rent, home-based businesses, online marketing, skill-based digital services, they all present their own challenges. .

Below are four reasons why having a second income is important and why fractional ownership in real estate is proving to be a lucrative option as a second income option.

1. Mitigation of rising expenses and inflation

Incomes remained nearly stagnant while prices of basic necessities including petrol, diesel and LPG soared. Investments like fixed deposits (FD) are struggling to remain viable. When we think of a “second source of income”, we invariably think of dividends received from stock market assets or rental income from residential real estate. However, if the volatility and inherent risks in the markets are not our cup of tea or if rent is not appreciating at a sufficient rate, then it may be worth exploring an asset class like real estate that offers greater stability.

This is where commercial real estate (CRE) can offer regular returns, higher than residential real estate and with less risk. Co-ownership refers to a group of investors who pool their funds to jointly purchase real estate, so that they can reduce cost burden and risk exposure and share rental income.

2. Prepare for an emergency

Financial emergencies such as job loss, health crisis and hospitalizations have sadly seen their worst facet, over the past couple of years. Such emergencies justify the need for a second income.

In sudden financial emergencies, stock markets or mutual funds may not always guarantee sufficient returns. Some may have to dip into their provident funds or fixed deposits and face penalties.

In such scenarios, a steady rental income can come in handy as a steady source of monthly income. However, yields from residential properties are lower than those from condominium commercial properties. One of the best things about condominiums is that rental income is sent directly to investors’ bank accounts. It is especially ideal for investing in commercial grade A real estate (CRE), the cost of which can reach hundreds of crores, but requires only Rs 25 lakh from each investor. Such a premium CRE typically produces high rental returns of 8% to 10% – this means that an investment of Rs 25 lakh could yield around Rs 1.5 lakh to Rs 2.5 lakh per year.

3. Fund financial goals/pursue interests

It is now fashionable to have a second source of income to finance short, medium or long-term financial goals. Buying a car, enrolling in a refresher course, going on a dream vacation to Machu Pichu, or simply pursuing a passion are all goals that can be funded with a second income.

4. Corpus of the retreat

Mutual funds can be a reliable long-term source of wealth generation and savings for the future. Home ownership is another such option and CRE condominium promises higher long-term returns than residential property. CRE proposes a minimum lease term of five years, guaranteeing uninterrupted rental income. Plus, you’re dealing with A-level tenants – such as banks, IT companies, and multinationals – with deep pockets who intend to stay for long durations.

In conclusion, whether it is to increase your savings, accumulate funds for a specific objective or prepare for emergencies, we live in a time when diversifying your sources of income is indeed a necessity. Moreover, it is prudent to explore the new avenues that have opened up and consider online methods, to improve yourself and to take advantage of the power of the Internet.



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Disclaimer

The opinions expressed above are those of the author.



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