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Pros And Cons Of Real Estate Investing
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Posted On :
Jan-14-2011
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Article Word Count :
528
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The article explains the pros and cons of real estate investing.
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The concept of real estate investing involves the process of acquiring real estate for profit purposes. These real estate investments the profits come gradually when the owner rents these properties in what is known as a cash flow method. Another way of earning money is acquiring a property, improving and upgrading it then resold for a capital gain. Some real estate investors also wholesale properties in order to make a nice profit.
You will hear a lot of people that will tell you that real estate investing is a win-win situation where you cannot lose money. Without any doubt, this statement is false as there is absolutely no fail-safe way to invest money in anything without having to assume some risks that come along with this investment. Although there are a few risks, the good side is that there are more advantages in real estate investing.
The first big advantage of investing in real estate is that you are purchasing a very expensive product which means that each of the property that you successfully sell will generate bigger profits, in most cases. The second positive aspect of investing in houses is leverage, or the possibility to borrow money based on the value of the property. It is a certainty that it is considerably easier to finance real estate in comparison to any other investment type. For other assets you will have to offer a full purchase payment in order to obtain that certain asset. The good part when investing in real estate is that you will only have to afford a small fraction of the purchase price (5-20%). Taking all these into consideration, although real estate is extremely expensive, it still is easier to purchase in comparison to other products.
For beginners, a reliable and minimum-risk way of getting started on the business is to bird dog. The “bird dogging” concept means that the beginner starts searching for good deals for another, more experienced investor. By doing so, he will learn to find, recognize and understand a good value.
Moving on to the disadvantages, the most important one would have to be that real estate is a non-liquid investment which requires taxes to be paid and regular maintenance. An optimal investment portfolio must have some liquid assets which can be converted into cash very fast in order to sustain the investment made in real estate when the returns are not enough to cover the recurring costs.
In the history, there were many real estate booms and many speculators decided to make purchases without thinking about the ongoing costs involved. After the boom, the real estate starts to work against these investors which means that these persons have lost a lot of money during the resale.
One last disadvantage would be that because of the fact that the society and the economy fluctuates and evolves, there is no certainty that the value of the homes will maintain in the future. In other words, any real estate investment involves risks assumed and certainly this isn’t a win-win situation but with proper planning, timing and clever thinking, it can be a very profitable business.
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Article Source :
http://www.articleseen.com/Article_Pros And Cons Of Real Estate Investing_48526.aspx
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Author Resource :
Find Cape Coral properties for sale by accessing our website located at www.floridacapecoralrealestate.com .
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Keywords :
Cape Coral properties for sale, Cape Coral real estate for sale,
Category :
Finance
:
Real Estate
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