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Real Estate as an Investment: Is it Worth buying?

INTRODUCTION

Buying Real Estate in the present times means a lot more than finding the perfect home. Real Estate investments have become widely popular these days, all credits to the exponential rise in the values of such properties and the ever increasing craze of the public for these investments. These properties have all the potential to give large profits and gains to the buyer if done right. However, these all come with their own complications and limitations as well.

The investment in case of real estates requires a lot of background research and balancing of a lot of factors before locking on a deal which makes it a lot more complicated as compared to investments in stocks and bonds. But when one gets the deal finalized he gets to enjoy the whole range of benefits from the investment. The real estate investments can be of different types. The Rental properties include the most common type of real estate investment.

TYPES OF REAL ESTATE INVESTMENT

In this type of investment, the owner buys a certain property and rents it to another person. However, it is the owner who needs to pay the taxes and maintenance costs of the property. The rent that the landlord fixes for the tenant ensures that all these prices are covered in the rent amount itself including a profit margin as well. Almost all regions around the world have seen a steep increase in the home price index in the past few decades. However, this type of investment is futile if the tenant tends to cause losses in terms of property. The other types of real estate investments include Real Estate Investment Groups which are similar to real estate mutual funds. These handle the responsibility of maintaining the property in case the buyer does not want the hassle of handling the responsibility. The other type is real estate trading where the buyer of a property aims at selling it at a higher price after maintaining a time gap between buying and selling by keeping a profit margin for himself. This is popularly referred to as flipping properties.

INVESTMENT IN REAL ESTATES: THE POSITIVE SIDE

Going with the flow, the people generally take interest in making investments in real estates and especially the rental ones because of the following advantages:

  • A STEADY CASH FLOW

As direct as it might sound, but the primary purpose for which people invest in real estates is the steady cash flow per month. The cash that flows in compensates the initial investment that is made for the property and also makes additional profits for the buyer. The income that is obtained is passive which means that this extra money can be used for investments in other real estates or business or even traveling.

The real estates provide a stable and predictable cash income for the owner which is one of its best features. This is highly profitable in case of the young entrepreneurs who are susceptible to ups and downs in their careers.

  • LOAN PAY DOWN

One of the best parts of the rental real estate investment is that the tenant is actually the one who indirectly pays the mortgage charges. This leads to an increase in the net worth every year. Since the loan is paid down timely, the property acts as a potential savings account where the owner need not necessarily make deposits but still, the savings grow continuously.

  • TAX BENEFITS

The Government has rewards for the owners of properties who put them for rental purposes. This might include depreciation and lower tax rates which ensure profits on a long-term basis. The money that the owner receives as rent in not included in the self-employment tax.

  • APPRECIATION ENSURED

The value of the property that one buys generally increases as one pays the loan. The real estate is one such segments where an appreciation is ensured. Over the time the value of the real estate properties tends to increase gradually which makes them worth an investment.

  • THE POSITIVE SIDE OF INFLATION

The real estate property owner tends to gain profits out of the inflation situations. With the mortgage rate always remaining constant, an inflation will only lead to an increased cash flow into the pockets of the owners.

CONCLUSION

With all these advantages at stake, an investment in real estates is definitely beneficial. However, these are some factors that are susceptible since they depend on a lot of other factors as well. These factors tend to vary from region to region across the globe and also from time to time. hence a thorough analysis needs to be made before locking on a particular investment. Rest assured, the investment is definitely going to yield sweeter fruits for the owners.

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