Investing in Real Estate

Think carefully about making the decision to buy property, and look at the advantages and disadvantages.

The decision to invest in real estate is not one that you should take lightly. Unlike putting your money into a static high interest bank account, investing in real estate is rather like climbing a mountain. You will only get to the top by putting in time and effort and taking good advice.  There will be times of exhilaration and times when you wonder why you started. Sometimes you will take a wrong turning and other times you’ll find a path to take you further than you thought possible.

Investments in real estate are considered to be reasonably secure. Of course there are some pitfalls: for instance, a hike in interest rates could stretch your finances further than anticipated or the housing market could fall. There are times when you could have no tenants, or they might cause damage to the property. This is when insurance, tax breaks and how you have your finances set up, come into their own. Eventually, as you build up equity in your property, and if rents rise over this period (which they usually do), its value will increase and you will more easily cope with any short-term fluctuations in the property market.

Advantages of investing in real estate

As with any form of investment, there are advantages and disadvantages to becoming involved with real estate.

The main advantage is that a property is a physical asset. If your finances become dire, you can always sell it. There is always going to be a demand for land and property, and in times of recession, there are more people looking for houses to rent. You may be able to use your own house as equity to make your first purchase and depending how high you set your sights, you may not need a huge deposit to begin your property portfolio.

Disadvantages of investing in real estate

Of course, as with any form of investment there are disadvantages, the main one being that you have to take a long-term approach to investing in real estate, as your money becomes tied up for a relatively long period. You will also need to be able to cover losses such as losing tenants, fixing any damage and maintaining the property.

The final consideration can be both an advantage and a disadvantage. Owning rental properties can be very time-consuming, but this is fine if you love dealing with people and making things work. It can also be quite stressful, mainly due to problems with tenants. Some landlords get around this by using property management companies, but even they have to be regularly checked to ensure they are keeping up with their obligations.

Becoming involved in real estate is indeed a big mountain to climb. If you’re thinking of starting, make all the correct preparations and take expert advice. When you get to the top, you’ll be very glad you took that first step!  It is very rewarding.

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