Advantages and Disadvantages of investing in the Real Estate

Clem Anderson of Arizona is the owner of Southwest Private Investments LLC. It is a real estate investment company that is active in both the United States and Canada. They see the available opportunities in the real estate market and take advantage of them. Southwest Private Investments LLC offers all kinds of product types, including office, retail commercial, land, multi-family, and residential development and home packages. They will buy notes and invest into smaller business that aren’t in the real estate industry, whether they need start-up or expansion capital.

Over the years, we've heard the arguments as to which is the better investment: real estate or stocks. Both have their advantages and disadvantages, and there are several aspects of each that make them unique investments in their own way. To make money with either investment requires that you understand the positives and negatives of both.



Real Estate
Real estate is something that you can physically touch and feel – it's a tangible good and, therefore, for many investors, feels more real. For many decades this investment has generated consistent wealth and long term appreciation for millions of people. Depending on the location of your real estate, you can enjoy sizable returns on your investment. Real estate investment site Biggerpockets.com produces an annual real estate investment index for major U.S. cities. According to their latest index for 2016, the area with the best returns is Dallas, TX where real estate investors saw 20.7% in unleveraged returns. While your returns may not be Texas big, investing in real estate can be very lucrative.(For more insights on the long-term average annual returns on real estate, see: What average annual return is average for a long-term investment in the real estate sector?)

There are two main types of real estate: commercial and residential. While other types exist (mobile home parks, strip malls, apartment buildings, office buildings, store fronts and single-family homes), they generally fall into those two categories. Making money in real estate isn't as cut-and-dry. Some people take the "home flipping" route – searching for distressed properties, refurbishing them and selling them for a profit at a higher market value. Others look for properties that can be rented to generate a consistent income.

Generally, a down payment of up to 20% of the purchase price can be made, and the rest can be financed via a mortgage.

Getting a mortgage to purchase a home gives you leverage, meaning that you can invest in different types of properties with less money down, helping to build your net worth or income that you could make off the properties. While this can be a positive, if this leverage is used incorrectly, you may owe more on the properties than they are actually worth. Thus, it is important to critically evaluate the terms of your loan and budget wisely.

Advantages of Investing in Real Estate
There are many positive benefits to investing in real estate, including depreciation (writing off wear and tear of a commercial property), tax deductions and finally, you can sell the property through what is know as a 1031 exchange, and will not have to pay capital gains taxes, as long as you invest the money into a similar kind of property type.

Disadvantages of Investing in Real Estate

Like all investments, real estate also has its drawbacks. Most importantly, the investment is illiquid. When you invest in a property, you usually cannot sell it right away. In many cases, you may have to hold the property for several years to realize its true profit potential. Also, the closing cost can add up to thousands of dollars, and include taxes, commissions, and fees. Further, real estate prices have a tendency to fluctuate. While long-term prices generally increase, there are times when prices could go down or stay flat. If you have borrowed too much against the property, you may have trouble making the payment with a property that is worth less money than the amount borrowed on it.

Source - http://www.investopedia.com

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