Pros and cons of investing in real estate

Pros:

Generous profit

There is tremendous advantage in chancing upon a property that is of low value. It can be progressively rehabilitated and sold at a much higher price. You end up getting a lot more than you bargained for. This process is termed as “flipping”. The property may be at risk of foreclosure or may require very little restoration. Some investors purely invest for the purpose of flipping. However, one must exercise abundant caution before embarking on such a venture.

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Security

There is a sense of financial security in property investments because property value does not stand on shaky waters, like stocks or bonds. Nevertheless, this does not guarantee that the investor will always make a profit. The prices may not vary in the short term but in the long run, it does make a difference. The investor has to do his homework before purchasing any piece of land.

Dual income

Real estate offers the possibility of a double income, much like people who invest in shares. But unlike stocks where the income is in the form of a dividend (income distributed to shareholders based on profits made by the company), income generated from real estate is rental pay which is far more reliable. Stocks investment is much like a game of poker where there can be instant capital appreciation or complete loss of money. Real estate offers a slow but steady increment in the capital amount. One can also evade income tax with real estate investment.

Cons:

Maintenance cost

In certain cases, the cost of maintaining a property is preposterously high, causing the investor to lose money instead of making profits. Also, property tax in urban settings come in the way of selling the house at a higher price. Besides the regular maintenance charges like electricity and heating, the investor runs the risk of renting out the property to benighted people who are unfit to take care of a unit. This will only pile on bills when it comes to repairs. As if that were not enough, the investor also has to cover insurance charges.

Requires high capital

Obtaining land is no easy feat. Due to the high capital, buying and selling property becomes a distant dream. This is why most people turn to bank loans as a last resort.

Tereso sobo Author