Today we want to talk about a topic of investment, namely, investing in real estate.
What is real estate investing?
First of all, I would like to say that this is always a profitable option for investing your capital.
But, like any other type of investment, this one involves a certain risk and the possible loss of a lot of money.
So, investing in real estate is investing money in real estate objects that are either under construction or already built, the ultimate goal of which will be to obtain benefits.
Investing in real estate attracts many people.
These are large investors who do this professionally, and ordinary people who want to buy an apartment or a private house for personal use or lease.
The Benefits of Investing in Real Estate Can be of Two Types
- Income from the rental of real estate.
- Income earned from the resale of a property.
Thus, you receive either a large income immediately in the event of a resale, or a small income, but monthly when renting out.
Here you need to choose exactly for you. When you rent a room, the risk is small that something might happen to it and you will be left with nothing, but when you borrow speculative investments, buying and selling real estate, the risk increases since the amounts are large and there are many pitfalls.
Types of real estate investment
Real Estate Investments are Divided into Two Types
- Investing in residential real estate.
- Investing in commercial real estate.
Both options can be used for renting or resale as well as for personal needs.
You can live in the apartment yourself or leave it to the children.
The premises for a store, office or warehouse can also be used for your own business.
Pros and cons of real estate investing
Wherever you decide to invest money, there is a certain risk of not earning anything, losing part of it, or being left with nothing at all.
Investing in real estate is viewed by many people as a type of business, which in any case requires their own skills and abilities, a professional approach, the cost of intermediary services, taxes, repairs, and most importantly, it takes time.
Therefore, if you decide to invest in real estate, you should consider all the advantages and disadvantages of this type of investment.
Pros of Real Estate Investment
- Income from investments in real estate is significantly higher than the interest on the deposit invested in the bank.
- Real estate prices are growing, thus today you will invest in an apartment for 50,000 thousand dollars, and sell it in a year for 55,000-60,000 thousand dollars.
- Buying real estate on the secondary market practically does not entail any risks, the object has already been built, and then everything depends on you, for how much you sell it or rent it out, improving living conditions there.
- You can touch the real estate object; it is a product, not a service. It does not dissolve in the air, it can be seen and it can be used.
- Having real estate, you have the opportunity to take out a bank loan against its collateral.
- If you are renting a property and you urgently need a large amount of money, you can always sell it.
Cons of Real Estate Investment
- Investing in real estate is always a large amount of money, even during the construction phase.
- When buying real estate, you need a lawyer or at least a dealer.
- The payback time can be quite long. In the case of delivery – it is calculated in tens of years, in the case of resale – it all depends on at what stage of construction you purchased this property.
- Investing in real estate involves additional costs: the services of dealers, experts, lawyers, notaries and other professionals, additional payments per square meter in case of buying a property under construction, government taxes, expenses for repairs and furniture, utility bills.
- The rental income is too small, and if the property is not considered as a further benefit in the sale or donation, or for personal use, the meaning of such an investment is lost.
- Renting real estate is a passive income, but sometimes it is unprofitable. The tenants move out, time is needed to search, and receipts for utilities come every month.
So, we’ve covered the main pros and cons of real estate investing.
Naturally, if you consider in more detail each case, you can find additions to both lists.
But in general, if you decide on the place of purchase of the real estate, the state inside and outside and the amount to be invested, using these advantages and disadvantages, you can determine and approximately calculate the possible income from the acquisition.
Real Estate Investing Tips
The advice we give is general and requires detailed consideration in a specific real estate investment case.
- Determine the proximity of all necessary facilities: schools, children. Gardens, shops, pharmacies, metro stations.
- When buying primary real estate, the services of a dealer are not required, but a lawyer is desirable.
- What type of investment do you choose? Long-term – investment in a facility under construction or leasing; short-term – investments in the secondary market or resale.
- The state of the investment object. Calculate the approximate amount that you will need to invest in repairs, and what you will get from this.
- Use the services of your notary, and not someone who is offered to you by the sales department or dealer.
- Determine the general state of the real estate market in the country or city where you plan to purchase a property. Prices have been rising, falling or staying at the same level for several years.
- It is better to buy real estate in big cities than it is easier to sell it and rent it out.
Investing in real estate is a profitable option for any investor and any purpose.
If you want to increase your capital, investing in real estate can be one of the best options, but it is important to remember that you should not only invest in real estate but also consider other investment tools.