Should You Invest in Real Estate? Pros and Cons

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Whether you’re looking for extra cash or a new career, real estate is currently a booming, profitable industry. Currently a seller’s market, the real estate industry is full of opportunity, but could be a risky endeavor for those who aren’t experienced and don’t do their research. If you’re asking yourself, “should I invest in real estate?” begin by weighing the pros and cons.

Pros:

Real estate always has value

Real estate is a great investment because it always has value, which usually increases over time. It is a reliable source of income, and extremely flexible, allowing you to focus on other endeavors in your professional and personal life. If you’re starting a business, an investment property can be a reliable way to make sure you have money coming in when you’re dealing with the ups and downs of starting a company of your own.

Tax and loan benefits

If you run your own business, you have self-employment taxes to pay, but with an investment property, you are not subject to the same taxes. The government also rewards those who own property by offering lower tax rates on income properties. When it comes to an investment property that you might flip, you also have the benefits of acquiring loans outside the traditional means, like fix and flip loans, which are quick and easy to get, but too expensive to use in place of a traditional mortgage.

Extra savings

Using your investment as a rental property only results in extra savings for you in the long run. The rent the tenant pays will pay off your mortgage each month, so that is one less bill that needs to be paid out of your pocket. Also, as inflation occurs, your fixed-rate mortgage will stay the same. You can charge more for rent as the cost of living increases, but your monthly payments will stay the same, making it easier over time to save money and make a profit.

Cons:

Time consuming

Investing in real estate can be a full-time job, and if you’re doing this on the side to supplement income in addition to your real job, you may end up exhausted at the end of the day. Whether you’re fixing up the property to sell or using it as a rental property, it may take a lot of hard work on your part. Maintenance issues from tenants as well as doing background checks, cleaning between tenants, and showing the property can be some of the most time consuming tasks with rentals. One big mistake fix ‘n’ flip first timers make on their first flip is overdoing it on the house. There comes a point when you’re putting in a lot of unnecessary sweat and tears for a minimal amount of extra profit. You want your property to be in terrific condition, but making everything flawless could come at a cost to your mental health without the extra benefits in your wallet.

Not a liquid asset

Homes are not a liquid asset, which means they cannot be turned quickly into funds. If you find yourself in an emergency situation and you need cash at the ready, a property investment won’t be an immediate fix. Some liquid assets would be stocks and bonds, that can be easily translated into money that’s ready to spend.

 

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Disclaimer: This content does not necessarily represent the views of IWB.

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