As the housing market continues on the up-turn, real estate investment is becoming more and more appealing. However, that does not mean one should go and frivolously invest in any piece of real estate.
Here are the PROS and CONS of real estate investing:
Diversification Of Portfolio
By investing in real estate, your investment portfolio becomes much more diversified over the long haul. You now have a solid asset with long-term appreciation and sustainability.
Renting units in a building you own can be extremely lucrative and provide a steady income stream.
Appreciation Hedges Inflation
The probable appreciation of a piece of property can certainly aid in hedging against future inflation.
Cash Investment A Must
There are many, many costs that will occur when investing in real estate, and you must have those funds to be able to do it. When purchasing a rental property, you must put down the down payment, closing costs, and monthly carrying costs. In addition, there are taxes, standard maintenance, as well as insurance. Lastly, you will want an emergency cash reserve in case of large repairs or unexpected expenses.
Being a landlord is very hard – being a GOOD landlord is even harder. You are at the beck and call of your tenants which means odd hours and house calls, possibly 24 hours a day, 7 days a week.
While it is your money, by investing in real estate, your money is tied up in those properties. You can’t just sell the property willy-nilly either. You will want to wait to sell until the market is up and the price of your property has risen above the price you bought it for.