Friday, May 23, 2014

Pros and cons of investing in property

Salaries and business profits are common ways of generating an income and wealth. Aside from these usual avenues, you can also make money through investments. There are a number of different types of investments such as stocks and bonds to choose from. However, real estate investment is considered one of the less risky options. 

A drawback of investing in real estate is limited liquidity. Selling a property may take more time than selling other types of investment. This can be a problem when you need cash in a hurry. 

Choosing where to invest largely depends on the risk level you’re comfortable with. Consider these pros and cons of investing in real estate. 

Capital growth

Property appreciates in value over time. Whether you choose to buy a property to rent out or sell later on, property appreciation is a benefit you can enjoy. 

When renting out a house or condo, you could also benefit from the monthly income. 

Control over investment

Compared to other types of investments, investing in real estate gives you more control over the investment. Decisions such as when to sell, how much to sell your property for and who to rent it out to are all up to you. This freedom and control over the investment are a bonus many people enjoy. 

Safety and insurance

Investing in real estate is relatively safe compared to other investment types. Whether the real estate market is booming or not, your property is still bound to appreciate in value over time. You can also mitigate some of the risks by insuring your property against fire and other damages. 

Liquidity

A drawback of investing in real estate is limited liquidity. Selling a property may take more time than selling other types of investment. This can be a problem when you need cash in a hurry. 

Hidden costs

There are other expenses involved in real estate investment apart from the contract price and initial costs such as documentary stamp tax and agent’s commission. The ongoing ownership of the property will also inevitably incur tax, repair expenses and maintenance costs. 

Vacancy and bad tenants

If you choose to buy a property to rent out, you may face periods of vacancy with unrealized income while still incurring mortgage, tax and repair costs. Another risk for investors is getting bad tenants who may refuse to pay rent or damage your property. 


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