Investing in Real-estate
Probably you have been thinking about investing in real estate. Maybe something small, like a small rental place that you can hold for your retirement.
Here you can get some idea about the advantages and the disadvantages of owning real estate as investment.
Let’s start with the disadvantages first to get them out of the way.
The most important disadvantage is the liquidity issue. Money in the bank is considered an investment as well with a low risk and a low return. But the advantage of having money invested in a savings account or CD Market is that, it is liquid and always accessible. Sometimes with little fee or penalty and sometimes with no penalty or fees at all. But you can always access all or almost all of it (minus penalties and fees when applicable) at any time you desire. In case of real estate, you need time to put it on the market and you need to wait to find a buyer and finally you have more paperwork and need to wait more time to schedule the time so you and the buyer can go to a title company and sell the property and get your money back. Of course, there are fees for selling your property to consider as well.
Another disadvantage of owning a real-estate property as an investment is that the value of it can fluctuate with the property market value.
One year it can be very high and another, for different reasons, it can be low.
The third disadvantage of owning real-estate is the maintenance cost and other costs and fees, like taxes and insurance, that comes out of your pocket.
And finally owning a piece of real-estate as investment requires continuous occupation of the property. So, you need always to make sure that your property is occupied, which it may not be 100 of times. So that requires additional cost and effort to consider.
These are the major disadvantages of owning real-estate as investment. Now let’s talk about the advantages.
The first one is that throughout the history, real-estate has been proven to be the wealth builder for many. Many milliners and billionaires have somehow benefitted from owning real-estate. Even if all their wealth did not come from real-estate, they have benefitted considerably from real-estate.
Other benefits are that you can count on the income from real-estate to continue as long as you hold the property. That income can increase with the official government cost of living adjustment, for example you can increase the rental fee on a yearly basis.
And finally, this can be an advantage for those who don’t want direct daily involvement in their investments, you can have your property managed by third party companies so you only receive the rental income minus the fees and the cost that the management company needs to manage your property; then you have no exposure to the hassles of owning the property.
In conclusion, consider the pros and cons of owning real-estate as investment and you may find yourself on the side of owning one.