What You Should Know about Investing in Real Estate before You Take the Leap
Monday, May 21, 2018, 6:00 AM | Leave Comment
Whenever matters investment come up, real estate always seems to take the top slot. Many investors laud it and claim that it is a sure bet. It will never let you down, they say.
However, like just about every other investment, it does not favour everyone. Buying a house for yourself and family is one thing. Investing in rentals is a different cup of tea. There are pros and there are cons to investing in real estate.
Before you take the leap, you need to be clear about your reasons for choosing real estate as your investment of choice. Do you want it to be your general source of income? Is it because you have heard that real estate appreciates and is therefore a good profit-making endeavour?
Whatever your reason, consider these pros and cons first.
Pros
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It appreciates over time
So, one of your reasons checks out. Property investment allows you to make a killing with regard to the price if you decide to sell later. Later does not mean tomorrow though.
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Tax incentives
As a property owner, you stand the chance to receive tax incentives like depreciation value should the value of your property yoyo over time. There are a lot of circumstances that can arise with time that can raise or decrease the value of your property.
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A constant flow of income
Having a property that earns you rent is akin to having a salary. Every month, you expect a certain amount of money in your account for as long as the property is yours.
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Profitable
Real estate can be a lucrative long-term investment that can double up as your retirement plan. Having that extra cheque on top of your pension will ensure you live your best life.
Cons
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It takes time
If your plan is to rent or sell properties, that will take you quite a bit of time. If you are impatient or need to make money fast, this is not the venture to consider.
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It is not a liquid asset
This is wealth, yes, but it does not immediately translate to money in your wallet. You cannot get cash from it in an emergency.
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You have tenants to deal with
If you have the misfortune of landing problematic tenants who have to be reminded to pay their rent or conduct themselves in acceptable ways, you will have a bit of a headache there. It is always advisable to have an understanding before any contracts are signed.
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Risks and extra costs
Oftentimes, you are not quite sure if the property you buy will stand the test of time. Then there are the extra costs in terms of repairs and improvements.
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Liabilities
If, for instance, an accident happens on your property, you are liable and will have to cover it.
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The need for a mortgage
Buying property is not a cheap affair. Unless you have bags of money stashed away somewhere, you will need to get a mortgage.
A look at the pros and cons of investing in real estate should prepare you for any eventualities associated with this industry, and also help you in figuring out if this is the investment route that you need to take now or you can come later better prepared.
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