In this article we are going to talk about the advantages and disadvantages of investing in real estate. Investment in real estate is one of a Kind. It is something that adds more to ‘less risky’ investment in you Asset Investment assortment. Unlike other Investments, there is no specific and technical skills and tricks which a person should know to enter the Real Estate investment Sector. Most importantly, it is very easy to handle and risk free. Hence, most people prefer investing in real estate now are days. Moreover, earning returns through real and actual properties such as real estate is far more positive and exciting than that of the stocks and Mutual Funds plus you have it for a very long term. These are the actual fixed assets in which one could actually look at the usage of investment money and can be so sure about the return without specific and probable risks.
This Article discusses few pros and cons of the real estate investment giving a person full insight to the Sector and hence guiding him towards fir decisions regarding this.
5 Advantages of Investing In Real Estate
The advantages of investing money in real estate are discussed below in detail:
1. Direct Control
A person investing in real estate actually has full control over the property and the tenets. Unlike the other investing classes, a person investing in real estate enjoys control and the benefit of looking over the ripening of the seed that he grows. If you invest in such sector, you do not have to sit and rely over the decisions and happening in the economic world to decide your own income, rather you can actually make your own decisions, decide your own ways, own price and grow your portfolio at a larger pace. You yourself can use strategies to increase your rental income, Manage and attract the tenets towards your property and have full right to select your very own tenets. Every amount you invest comes back to you in form of a form of higher return.
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2. Inflation no longer affects you
When you are into the class of investing into the real estate, inflation no longer affects you. Inflation basically refers to the increase in the general price level which may be caused due to many factors in the market. When such situation arises, every other class of investment such as stock etc fluctuates depending upon such general price level that is inflation. But when you are in real estate, you generally get the amount of rent which was fixed and hence there could be no changes to it. This is one of the most important advantage of the investment into the real estates.
In another case, with the increasing inflation, the values of property you own increases, but your cost of mortgage payment which is fixed cost, remains constant. This also implies Higher return on the same cost which again implies profit.
3. You Enjoy Tax Benefits
This is again one of the most important benefits of the real estate Investment. Income received from the rent is not subjected to any kind of tax to be levied upon them. The government also provides a lot of tax benefits to the ones with the real estate investment. As the Real estate is a part of Fixed asset, government considering this also provides for the depreciation and other related advantages. Hence, there are unique tax benefits which are then provided to the investors of such kind. These can help specifically in increasing the wealth of the investors.
4. Appreciation over time
Whether it may be land or any other form of real estate, it grows over time. Basically, it is all about Buy less, Sell High sort of thing. It is Simple. You buy a property. Add toppings to it. Decorate it, increase its value and sell in the market. You definitely are earning a lot of returns and property would be sold on higher process. This is the simple theory of real estate. Also, the prices of stock can go down to zero. But the real estate remains same. This is very advantageous and hence a good benefit of Investing in real estate.
5. Insured Investment
When you invest in real estate, one of the advantages could be described as the surety and safety of you investment. When you invest here in the real estate, the benefit of insured investment is a major detriment. One of the most important factors in real estate is that leverage could be very wisely used. It is the use of money which is borrowed in such a way that positively increases returns on investment. Hence, by using the leverage wisely and properly, there could be a quick and maximized growth in the sector of real estate. The loans could be very efficiently used to expand the property and invest it to increase the returns. Besides, for such a loan, the monthly installments of the bank of credit granting institutions could be efficiently deposited and hence it helps to grow equity.
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5 Disadvantages of Investing In Real Estate
As every other class of the investment, there are also few risks involved with the investment in real estate. There could possibly be some risks or cons which could affect your investment. These cons are explained below so that it makes easier for you to make a choice and know about investing in real estate completely. The advantages of investing money in real estate are discussed below in detail:
1. You’ll need ample of Money
This is the first and foremost disadvantage of the investment in real estate due to which a lot of people stop thinking about investing in this class. If you want to make money, you already must have the money. A lot of problems are created due to this. For purchasing an estate, you need money, if you want to renovate it or repair the space, you need money. Sometimes, for the beginners it is difficult to obtain money as banks and other credit institutions do not grant credit without appropriate mortgage and creditworthiness in the market. Even after the credit is granted to a person, it continues to create the problems in the form of insurance and mortgage etc. In this way, a lot of money is used to create a real estate.
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2. It is Time Taking
One of the most important and reoccurring drawback of the real estate investment is that it requires a lot of time. For planning to create such a estate, borrowing loan for it and then completing it takes a lot of patience and time. A person cannot do it in minutes how it happens in the stock markets that you get everything served on a plate and you just have to make few quick decisions. Time is required very importantly in the learning to be done in order to manage the estate, the tenets and deal with the loans, installments and the returns. Understanding the real estate market hence in itself is a complicated task.
It is also a sort of long term investment which could not be possibly liquidates if asked for emergency funds unlike stocks. So, It has a lot of patience involved in it.
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3. Creates Problems
Tenants always create problems and hence it is also said that real estate investment is a thing of the ones with good terms. Tenets in a lot of way create problem for the owners of the estate. The person gets stuck in a lot of court visits and quarrels which disturbs him and also is time taking. These wastes his valuable time. There are a lot of chances that they do destroy and harm the property. Thinking it of someone else’s property, they do not even take care of it. This also creates hell lot of problems in the states which have tenet friendly laws.
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4. Problems With tax benefits
There is not always a benefit with the tax and tax benefit policies of the government in this regard. In order to avail tax benefits, the smarter ways should be adopted. For this a person has to be consulting a suitable tax professional. This again is a disadvantage in investment in real estate.
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5. Other Disadvantages
There are also other disadvantages of real estate investment such as if you buy any property at a wrong time which is wrong in nature, it creates a lot of problem. And also of you own an estate; there are a lot of accidents that may occur on the property which could decrease the value of property and you rather need more funds to repair it. Getting annoying renters is also a significant and common problems which the owners face is a big disadvantage.
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Hence, investing in real estate in it’s a way advantageous and disadvantageous at the same time. People generally invest in real estate to get a monthly fixed income, expand their set of investments and not to rely completely on the stocks for investment. It is important for s person entering such kind of investment class that he should be well aware of the properties and be able to manage such kind of tasks to sustain in the sector.