Buying and selling properties is an excellent way of making money and building wealth. It is also a nice way of earning passive income and is considered a long-term investment. It is a sustainable ‘get-rich’ strategy.
If you are making research and preparations to go into real estate investments, you will need to have enough cash in hand to start investing in properties. Buying a house, landed properties or residential complex can be costly. And again, you may incur expenditure in the area of maintenance cost. You might experience income gaps, especially when you are momentarily between tenants.
This article aims to furnish you with knowledge about the pros and cons of buying and selling properties. At the end of this article, you will understand if the real estate investment is a great choice for you.
Pros of buying and selling properties
Real estate properties appreciate over time.
Unlike assets such as vehicles, yachts, computing machines, and cabinetwork, real estate properties typically appreciate over time. Especially if there is good home improvement work like expensive kitchen installation, room expansion, garden decking flooring, conservatory, plastic fencing etc. This means the property value increases steadily. The rate of appreciation grows faster than the yearly inflation rate. However, there may be a few downtimes or gloomy periods where properties are bought at a bad time. But there is always a great opportunity to purchase quality properties at a cheaper rate, make renovations to enhance the property value further and make huge returns on investment. In ‘wall street’, real estate investments are always closely associated with ‘buy low and sell high’ because of its intrinsic value. While stock value can collapse to nought, real estate properties are considered hard assets that can always be improved.
Real Estate offers a constant cash flow.
Investing in real estate properties offers a steady flow of income, especially when you buy-and-hold. This means you can earn passive income through rents, and this cash flow can help you sort out the mortgage. The cashflow is passive, monthly income, meaning you have quality time to build wealth and enjoy family time.
The power of leverage
Investing in real estate properties allows you to use leverage to build your wealth. Leverage is a powerful financial tool that will enable you to borrow funds to buy properties. You can use this debt to increase your potential returns. Leverage is a great benefit of investing in real estate properties.
The power of control
Investing in real estate properties allows you much investment control. When you buy stocks, you are not in direct control of the stock value, and you can’t make decisions that will influence the stock value. But in real estate investment, this is different. You are in charge of decision making. You can reduce the likelihood of risk and enhance your property value expeditiously. You can engage in home improvement projects that can guarantee quick sales and huge returns.
The Cons of Buying and selling properties
Buying and selling real estates properties also have some disadvantages. Here are some:
High cost or expensiveness
Buying and selling properties is expensive. Real estate investment can be time-consuming and involves a lot of money. When you buy a real estate property, you are responsible for the taxes, mortgages, repairs, improvements and maintenance. To maximise the house value, you will have to improve its curb appeal by installing a deck, regardless of the cost of new outdoor flooring.
Real Estate is time-consuming.
We want to reiterate that the real estate investments take a lot of time. For one, you will have to invest your time learning how the business and industry work. This is important because people who are inexperienced and inadequately informed will make wrong decisions and lose money. Also, real estate property management takes a lot of time. Repairing and improving your properties is also time-consuming. So you will need a lot of dedication to go forward with the business.
Real Estate Is a Long-term Investment
To enjoy success in your real estate investments, you will have to invest long-term. Real estate properties are also illiquid assets. Unlike stocks — considered liquid assets— that can be liquidated immediately for cash when needed, real estate properties take time and effort to sell-off. This means there is a decreased access to cash, and costs of transactions are high.
Real Estate Investing Has Risks
Real estate investment is very lucrative, but it has risks, just like every other investment type. It is essential to understand these risks. Here are some of the unique risks in real estate investment:
- The real estate market is unpredictable. This is especially true in today’s pandemic society. This can lead to the depreciation to your properties. Though, with analytical research, you can reduce the risk of purchasing at the wrong time.
- Buying a property from a bad location can spell doom for your investment. This is because landed properties are unmovable. So, a bad location will mean the inability to make profits.
- There is a risk of negative cash flow. There is the possibility of losing your money after buying properties. For instance, you may incur huge expenses from high maintenance costs.
