Property Laddering: How It Works, Benefits And Things To Keep In Mind

Buying a home of your own is one of the biggest financial decisions you can make. With surge in property costs, it can be difficult to buy your dream home. Considering the huge investment in buying a residential property, at times, the lifetime savings, it could be financially overwhelming.

With a little planning and disciplined investments over long term you could be able to accumulate the corpus to buy your first residential property. There are also several other ways, apart from securing a home loan, to own your house. Now, many people are taking another effective measure to buy their home-- property laddering.

Property laddering has become increasingly popular over the years. It allows one to invest in real estate without waiting for one’s dream home. Property laddering is a practical way to leverage the property market to your benefit.

What Is Property Laddering?

Property laddering means buying real estate that is affordable right now and upgrading to a better one by selling it in a few years. 

The initial goal is to purchase an affordable home in a fast-growing location. The buyer can rent it out or live in it. After a few years, once the value of the house appreciates, it can be sold.

This allows people to buy a more affordable home and gradually shift to higher-priced properties. The sale of the earlier property can enable one to purchase better real estate.

What Are The Benefits Of Property Laddering?

The strategy can help one invest in real estate in a goal-oriented manner. It allows you to upgrade to a better property without taking too much risk.

For first-time home buyers, this can be an advantageous strategy in terms of long-term investments. The property market can work out in their favour in the long run, leaving them with more funds to purchase their dream home.

Things To Keep In Mind About Property Laddering

Property laddering sounds like the perfect way to maximise your investments in real estate. But the approach is not free from risks.

Here are some factors to keep in mind:

Market Volatility: Don’t aim too high in terms of gains, as property prices may not appreciate as per expectations due to market volatility.

Time And Money: If you engage in property laddering, remember to keep a margin in terms of time and money. Home loan processing can take time, as can selling a property. Do not enter any real estate deals rashly.

Loan Eligibility: If you take quick loans in succession for repairing or purchasing property, or other purposes, it can adversely affect your credit score. This will leave you with a lower standing when it comes to eligibility for future loans.

Other Charges: Don’t forget to calculate other charges and taxes that might reduce your profits. This includes stamp duty, registration fees and capital gains tax.

 Property laddering could be rewarding if you set clear goals and have enough funds to buy your first home. It just needs regular investments and accumulation of funds to buy your dream home, while your first property can work as a financial cushion. However, the slowdown in the real estate sector could pose a significant risk to your property laddering plan. So, it’s advisable to factor in your financial conditions and the real estate sector’s growth prospects while opting for this measure.