Pros and cons of real estate investing

Buying an investment property can be an overwhelming yet a dicey decision especially in this part of the world.

Any type of property, whether it’s commercial or residential, can be a good investment opportunity. For your money, commercial properties typically offer more financial reward than residential properties, such as rental apartments or single-family homes, but there also can be more risks.

Understand the full pros and cons of investing in commercial properties is important so that you make the investment decision that’s right for you.

Why Invest in Property?

Investing is a choice many people make at one point or another, in the hope of bringing wealth to their lives. Whilst there are many investment alternatives such as stocks, bonds and cash, property investment tends to be viewed as one of the safest and easiest options.

However, property investment isn’t for everyone. Thus if you are considering investing in property, it is important to weigh up the pros and cons.

PROS

• Capital Growth: The value of your property will grow over time and may be extremely beneficial financially if well chosen. Not only will you benefit from steady capital growth, but regular annual/monthly rental returns

• A safe investment: This is the only investment market which is not dominated by investors, hence creating a natural buffer in the market. It is also the most forgiving investment; if you purchase the worst house in the area, chances are that its value will still increase over time.

• Mitigate risk: You can insure your asset against most risks; fire / damage / a tenant leaving, damaging your property or breaking the lease. Its a pity that such an advantage is not be explored in this part of the world.

• Anyone can invest: You do not have to possess a vast amount of knowledge, as you may with stocks or opening up a business.

• Veto Power: Unlike other investments, you are in full control of your property investment; you can make all the decisions and have control over all of your returns.

CONS

• Liquidity: Although you can sell your property if things get tough, the process is not as quick as it is to sell other investments such as shares

• Hidden and ongoing costs: Along with the initial costs of investing in property, you will need to consider the on-going hidden costs of property investment such as fitting out the property, maintenance and repairs, building insurance, land tax, council rates, etc. Other investments such as shares do not incur ongoing fees.

• Bad tenants: Problematic tenants are every owner’s nightmare. They can severely damage your property, refuse to make payments and sometimes even refuse to leave the property. Some disputes can take years to resolve and become very stressful, especially if there is an emotional attachment to the property.

There are no perfect investment avenues and real estate investment is no exception. For each advantage there is for tying up your money in investment property, there is at least one disadvantage. It is important that you go into any venture with your eyes wide open.

Investing in real estate may be a great way of increasing your net worth, but it’s not necessarily quick, and rarely is it easy!