If you look at the success of real estate investors, it’s clear to see that there’s the potential to make a lot of money doing so. Some people even make a successful career out of investing in real estate.
Real estate investing seems simple enough, but it’s not as simple as it looks. It takes a lot of time and effort to find the right property that will be profitable, and even after you’ve found the best place to buy property in the UK or wrapped your head around buy-to-let and REITs: there’s even more work to be done. Here are some of the pros and cons that come with being a property owner.
Benefit: Build Wealth/ Earn an Extra Income
Probably the biggest benefit of being a real estate investor is that you’ll be earning passive income. Passive income is income from a job that doesn’t require much work. Real estate investors who purchase properties with the intention of renting to tenants earn a secondary stream of steady income each month.
On the other side of property investment, you can purchase properties and hold onto them as they appreciate in value. The majority of properties will always go up in value as long as they’re located in a good, thriving location and if you keep up with the property and don’t make any unnecessary renovations to it.
Cost: May Be More Responsibility than You Think
Even though you earn passive income from owning and renting property to others, you can just sit back and forget about your property altogether. As the property owner, you’re also the landlord, meaning that you’re responsible for fixing everything that breaks down on your property. Even if you don’t have tenants and you’re holding on to the property, you’re still responsible for its maintenance of it.
Fortunately, you can hire a property management company to manage your property for you. However, this is a hire service so you’ll still have to pay for a property manager or a management company to take on this responsibility for you. Still, some real estate investors choose this route because they still have most of the control and can earn money from anywhere in the world.
Benefit: Allows for More Flexibility and Control
With real estate, you’ll be able to diversify your investment portfolio with just real estate alone. There are so many different types of properties to invest in: residential real estate, commercial real estate, raw land, and so much more. Investing in different types of real estate also helps to protect you from the fluctuations in the real estate market.
Real estate investing also gives you more control over how successful you can be with your investment, compared to other types of investments. When investing in stocks, you don’t have much control, but with real estate, there are things that you can do to ensure your success, such as:
Effectively marketing your property to potential tenants
Building a reputable name for yourself by being a good property owner
Cost: The Actual Cost of Real Estate
It’s no secret that real estate is very expensive, with commercial properties being one of the most expensive types and residential properties being less expensive. However, these prices can fluctuate depending on where you’re looking at properties. For example, the median cost of a home in California is around $600,000, whereas the median cost of a home in Georgia is around $270,000. The good news is that it’s possible to apply for a loan for investment properties.
There’s also the option of investing in a real estate investment trust (also known as a REIT), which is a much more affordable option for a lot of investors. The downside to REITs is that you don’t earn as much from them as you would from actually investing in a physical property. This is because a company or other entity with sufficient funds has invested in the property, and allows people to invest in a company stock or mutual fund.
It’s possible to be successful at investing in real estate, you just have to really research your market and be aware of all of the costs that go into purchasing and managing a property. You also have to be patient and consistent in order to see success from all of your hard work. All investments and career paths come with advantages and disadvantages— you just have to weigh out the pros and cons to ensure that you’re making the best choice.