Real Estate is also one of the most favorable asset class among the general investor. Hence one of the best things to do with your money could also be an investment in real estate, especially if you are not comfortable with the tricky jargons of the financial world. On the other hand, it is also important before investment into this sector to do a right and detailed analysis else it could lead to being a reason for the biggest money loss too. Real estate could give the most influential result with its ability to show a prominent increase and decrease in its investment as the returns are directly or inversely proportional to the condition of the economy. The ability to use borrowed money to invest in real estate amplifies gains and losses. If property goes up in value corresponds to an increase in equity it’s a pure profitable scenario. However, when the market goes down, the effect is equally drastic.
Ultimately, real estate investing has significant advantages and disadvantages at the same time, and the decision to invest in real estate is unique to each investor.
- Real estate offers two ways to earn returns. As you own a rental house you’re hopefully collecting the difference between your rents and your expenses as profit. Even a 1- or 2-percent annual increase in value can add up to a significant long-term return when you combine it with paying down your loan and collecting your rents.
- Real estate is also an extremely tax-efficient investment. The ability to depreciate buildings can cancel out some or all of your profits, letting you collect favorable rental income. Its value increases without you having to pay tax on it until you sell, thus you defer paying taxes until you finally cash out of real estate investment.
- India with its strong cultural values believes in buying land and keeping it for there future. A right land is the best asset that continually appreciates in value (under normal economic situations) and can give the highest returns when encashed.
- Management and Maintenance is the biggest disadvantage of real estate. It’s easy to own and difficult to maintain. While third parties (recently started in India) have started managing properties ( larger properties because of management cost), smaller properties tend to be relatively expensive to manage.
- Liquidity is an issue with a real estate owner. It is not easy to sell.
- Once you’ve invested in an asset, you’ll usually own it for a while. Not only can selling real estate be time-consuming but buying and selling it is also relatively expensive. -All of this makes real estate a better long-term investment than a short-term investment in most cases.
- Landlord-Tenant problems
- Land Grabbing problems.