What are the advantages and disadvantages of real estate investment?

What are the advantages and disadvantages of real estate investment?

Real estate is a long term investment avenue for the investors. It is a profitable investment for those who have an appetite for risk and are patient with time. Real estate involves investment in housing, commercial housing, palace, shops and hospital infrastructure. Some people buy a shop, flat or plot for investment purposes. Real estate has higher Risk, it depends upon the various factors such as place, property prices and accessibility.

However, some investors have an investment portfolio which includes investments such as stocks, bonds, government schemes etc. But they are ignoring the investment of real estate. However, if they invest in real estate, They can get a higher rate of returns than traditional investment. What are the advantages and disadvantages of real estate investment?

ADVANTAGES OF REAL ESTATE

There are many advantages which are the following: What are the advantages and disadvantages of real estate investment?

Advantages of investing in real estate

Inflationary Benefits
Direct Control
Rapid Multiplier
Easily Valuable
Better opportunity for the buyers and sellers

( 1 ) Inflationary Benefits:- When the prices of all various commodities. Every economy is affected directly by inflation. Its market value will also increase during inflation. Whose benefit may be derived by the investors during the inflation period.

( 2 ) Direct Control:-Investment in real estate does not require any high degree of knowledge as well as the help of the brokers. Whereas, the stock market needs a high degree of knowledge and it needs the help of brokers. With the help of which investors can invest in different stock markets. So no interference is required by anyone in the investment in real estate. If investors desire, they can trade on their own.

( 3 ) Rapid Multipliers:- The investment in real estate provides handsome returns in the long period of time as compared to other securities and financial investments whether these investments are government and private avenue. Example:- A plant or shop purchased in a suburban area gets higher value within a short period as compared to other securities.

( 4 ) Easily Valuable:- The value of real estate can be measured by a layman on the basis of property values prevailing in the market. This does not require any complex analysis to invest like the stock commodities. Thus a layman also has the opportunity to invest in real estate without any complexity hurdles. Because anyone layman is able to measure the local values of real estate.

( 5 ) Better Opportunity for the seller and buyers:- Real estate always measures its values based on the demand and supply factor. So which system provides equal opportunity to the buyer and seller. However, they can negotiate for the best possible rate to the dealing property and they can reach the best optimum deal. So they can do such a deal without any obstacles. What are the advantages and disadvantages of real estate investment?

DISADVANTAGES OF REAL ESTATE

Disadvantages of Investing in Real Estate:- Whether real estate has many benefits for the investors. However, it also has some disadvantages. Various disadvantages are as follows: What are the advantages and disadvantages of real estate investment?

High Transaction Costs
Recurring Costs
Lack of efficient Market
Acquisition through Debt
Highly illiquid
Volatile and sensitive

( 1 ) High Transaction Costs:-

Although the rate of return on the investment of real estate is higher than the investment of equity, debt funds and securities. But the cost of transactions is higher than other investment sectors. Because real estate involves high transaction costs. When property is transferred from one person to another. For such a transaction , a high cost has to be incurred.

( 2 ) Recurring Costs:- Any property is required to maintain costs such as repairs, painting, municipal taxes, brokerage costs and sewerage etc. Because these costs are incurred to keep the property safe and secure from damages. Only making investment in real estate does not alone acquire cost rather it includes many other costs like legal expenses and various taxes.

( 3 ) Lack of an efficient Market:- It is the major problem of real estate investment that its market is not as efficient as the stock market. In developing countries like India, real estate is still growing. Because most of the investors are not aware about the investment concept of real estate. However, in developing countries like France, Germany, usa. The investors there include real estate into their portfolio investment.

( 4 ) Acquisition through Debt:- Mostly investment in the real estate sector is incurred throughout the financing. Thus after the long period of acquisition of property, instalments are to be paid in the long period. Which increases the costs of investment in real estate. The real owner can possess such property until he pays his final instalment to the finance company. Because legal documents are possessed with the financial company till the finalised settlement of debt.

( 5 ) Highly illiquid:- Investment in real estate lacks liquidity as it is inflexible. Investment in real estate does not allow profit or funds immediately when the investor needs funds urgently. So he/she cannot sell his/her property at his desired amount. But such benefits are available in the stock market which also provides liquidity to the investors when they need.

( 6 ) Volatile and Sensitive:- The taste and preference of the investors cause the prices of real estate to volatile at any time. Example:- When people of village shifts to city, due to which prices of the property and plot will be changed based on the demand and supply. So tastes and preferences are also responsible for changing the prices of real estate. Thus, real investment volatile prices prevent investors from investing in the real estate.

Conclusion:- Real estate investment has many advantages along with the disadvantages. Such merits and demerits are arised due to the location, taste and convenient services available there. However, real estate is always profitable in every developing city. Therefore, any investor can invest in real estate after rational thinking. What are the advantages and disadvantages of real estate investment?

What are the advantages and disadvantages of real estate investment?

Note:- Important question related to the investment.

Avenues of investment to the investors.

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