Nowadays, a host of investment options are available to an investor. They include stocks, shares, gold, commodities, mutual funds, systematic investment plan (SIP), fixed deposit (FD), real estate, cryptocurrencies, etc. Similarly, investment channels are broadly classified as long-term investments and short-term investments. Long term investors should know of 10 pros and cons of investing in real estate. Options for day trading are also available at an investor’s discretion.
Typically, an investor chooses among the investment options based on his risk tolerance levels. Often, there is a tradeoff between risk and profitability in any investment option, in which an investor may choose to invest.
At times, investors invest in a channel about which they are passionate. Similarly, an investor may choose to take the aid of AI recommendations or human advisors for deciding upon the stocks in which they should be investing. Sometimes, investors invest in startups.
It is recommendable to know a little bit more about any channel in which you are going to invest. In this article, we take a look at 5 pros and 5 cons of investing in real estate.
10 pros and cons of investing in real estate
Pros
1. Simplicity
When investing in real estate, one considers a host of factors such as location, locality, size, and type of property. One also presumes how popular the property is going to be among buyers over the years to come. However, complex algorithms and abstract ideas are not involved in this investment channel. This makes investing in real estate easier.
2. Profitability
You could sell your real estate investment for a profit when property rates rise.
3. Generate ongoing income
You could rent your real estate investment to generate an ongoing income. Property rents rise with inflation.
4. Limited regulation
Individual property valuations vary in the Indian real estate market. So, real estate investments have the potential to make very large earnings.
5. Properties can be improved
Landscaping, roofing, and adding cabinets are basic ways to improve a property and make its market evaluation skyrocket.
Cons
1. Transaction costs are high
Buying stock shares is affordable for most people. Real estate is much more expensive in comparison.
2. Low liquidity
In stock trading, liquidity is high. It takes a split second to sell stocks for a profit. But, when real estate investments are to be sold rapidly, the seller is unlikely to get the best price and may have to incur losses.
3. Maintenance and management
When an investor buys a property, it has to be maintained, renovated, and managed. In case the property stays unoccupied for an elongated phase, financial obligations, insurance, property taxes, maintenance, and management fees tend to shoot up quickly.
4. Inaccuracies
Investors sometimes purchase unseen houses at auctions. They may not get the best deals in all cases.
5. Liabilities
Legal and financial risks are involved when investing in real estate.
Conclusion:
We hope the 10 pros and cons of investing in real estate discussed in this article help you make sound investment decisions. If you have something to add, please feel free to use the comments section.
