Generally speaking, real estate has been a trusted investment for many years now. People who have made investments in the real estate industry and have seen positive returns always speak highly of it. If you are someone who is new to the investment world and need a way out of your dilemma of which of the two is a safer and more profitable investment, keep reading.
Understanding The Pros And Cons of Investing In Real Estate:
- Returns through rent – You can get decent returns on your real estate investment through rental income. No other sources of investment provide these returns with such low-risk involvement.
- Consistent Appreciation – The best factor about investing in real estate is capital appreciation. You can expect to resale a residential property 6-10 times in value than what you purchased it for after around 20 years. Moreover, there is a 7-10% value appreciation annually in Tier 1 & 2 cities.
- Monthly income – Another great thing about investing in a property is that you get a fixed monthly payment. This can be a game changer. It can change what your monthly inflow of income looks like without putting in much effort. All you have to do is find the right tenants to ensure a long-term monthly income.
- Lower Risk – If you enquire about the real estate that you are investing in beforehand and ensure that all the paperwork submitted by the seller is verified, the risk involved in such an investment becomes significantly low. Once you own the rights over a property that is in the right location, it can ensure you significant financial benefits
Cons:
- Significant initial investment – Purchasing any kind of real estate takes a lot of money. Contrariwise to stocks, you need to make a dent in your pocket to own a piece of land. Someone who has good savings already or is willing to take up a property loan can invest in real estate. This significant initial investment is what makes people shy away from purchasing a property. However, if we look at the brighter side, it can be considered as a one-time payment which can ensure you guaranteed monthly returns.
- Liquidity levels – When we talk about the liquidity of an investment, it means the time it will take the owner to sell it and convert the amount into cash. Real estate has low liquidity levels as it takes a significant amount for the owner to find the right buyers for their piece of land. It is not something that happens overnight. It takes some time for the owner to put out the advertisement and get done with the formalities of selling a property. Therefore, you cannot expect urgent cash in exchange for a real estate sale.