Some people have found success in real estate investment but it’s not a venture for everyone. It’s a serious commitment to borrow money from a mortgage lender. With that being said, you should understand that there are pros and cons to investing in real estate. These factors will affect your decision to invest or not.
What Do You Want from Investing?
If you are going to invest, you first need to know what you want to gain from investing in real estate. This step is important because it allow you to understand what your role will be once you have invested. There are several common reasons people invest in real estate:
- Generate income
- Personal use
- Capital appreciation
The Pros of Real Estate Investment
- Real estate property always has a value and should appreciate over time, allowing you to sell it later at a higher price.
- Receive tax incentives for owning the property such as depreciation value if your property value does fall and rise over time
- Steady flow of income from tenants if the property is leased
- Can be a profitable long-term investment, which can help add to your retirement fund
The Cons of Real Estate Investment
Investing real estate can also have its disadvantages including:
- Time-consuming if you plan to rent or sell properties
- Real estate isn’t a liquid asset, so you will not be able to turn into cash easily in an emergency
- Dealing with rental tenants and maintenance issues
- Needing to take on a mortgage to purchase a property
- Immense amount of risk and extra costs associated with buying properties that may need repairs or improvements
- Increased liability for any accidents that may occur on the property
Before investing in real estate, talk to your financial advisor to determine if it’s the right move for you.