Is Real Estate a Good Investment?
Real estate is a wise investment option as rental properties can be a helping hand against inflation, and real estate costs less tax than investment in other industries.
However, it can be a liability in economic downturns, stressful tasks of real estate management, and frequent maintenance of rental properties can be very costly. I will explain all these aspects thoroughly in this blog.
What is Real Estate Investment?
Real estate investment involves purchasing, managing, selling, giving, or renting residential or commercial properties for profit.
What are the Types of Real Estate Investment?
- Home-ownership
- Buy-and-hold property
- Long-term rentals
- Short-term rentals
- Online marketplaces to invest, such as a real estate investment trust (REIT)
Advantages of Real Estate Investment
These are some advantages associated with the real estate investment:
Rental Properties as a Safeguard Against Inflation
When inflation rises in a country, the property rents follow the same path. However, the mortgage and house loan interest remain the same.
In this way, your rental income will protect you against rising inflation. Moreover, you will also get financial benefits from the capital gain on your property.
History of Real Estate Price Hike
The real estate industry has seen ups and downs like other industries. However, the bouncing-back factor is prominent in this sector.
The Properties have always witnessed an increase in prices over time. Therefore, real estate is the best option for long-term investments.
Privilege of Tax-free Investment
Another privilege of investing in real estate is the exemption from taxes. In comparison, you will pay heavy taxes if you do other investments such as stocks, gold, bonds, etc. You can take home a sizeable chunk of your investment returns.
Stable Return on Investment (ROI)
The rental income is stable compared to the dividends from any other investment. For example, the returns from the stock market and bonds are highly unpredictable and unstable.
Huge Supply-Demand Gap
It has always been hard to meet the housing needs of around 8 billion people. Therefore, the supply-demand gap of residential units will boost their prices. So, it is safe to invest in real estate.
Drawbacks of Real Estate Investment
Here are some drawbacks of real estate investment:
Rising Maintenance Cost
The one drawback of real estate investment is the heavy maintenance costs. Due to rising inflation, labor and material costs continually increase. It makes it hard to maintain the property.
At the same time, other investments, such as stocks, do not have any maintenance cost.
Not a Common Man’s Investment
Due to the low inventory of residential and commercial properties, their prices are increasing yearly.
Therefore, investing in real estate will not be easy for low-income classes of society. So, real estate investment will no longer be the common man’s investment option.
Rental Income is Not Easy Money
All the real estate investments do not turn into a passive income source. There can be several unpredictable issues if you are a first-time investor. For example, frequent shifting of tenants can be a hurdle in a permanent rental income.
Moreover, finding new tenants every time and giving heavy commissions to real estate agents may frustrate the new landlords, ending in their giving up on real estate investment.
Market Vaporization
The real estate market is always at risk of fluctuations. Economic decline, oscillating interest rates, and changing local market conditions can all impact property values and rental income.
Conclusion
Investing in real estate and making a profit is not an easy job. However, several advantages dominate its disadvantages. Your correct decision to do insurance for your rental money can save you from costly maintenance and the worst repercussions of inflation.
End of the day, investing in real estate or any other industry involves many factors, such as your interest, budget, previous investment experience, and more.
Consider all these factors, thoroughly navigate the advantages and disadvantages of real estate, and then make a wise decision about whether investment in real estate is good for you or not. Best of Luck!
Contact for Information and Consultancy
For information and consultancy on real estate investment in Pakistan and UAE, you can reach out to us via :
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