Real estate investment can be significantly profitable when it comes to real estate and personal finance. However, in certain cases it may not prove effective because of certain variables. Real estate investment is not an easy task and requires a lot of expertise. Before investing in real estate, you need to carefully look into all the variables and risks you might be facing. Therefore, you need to inspect the pros and cons of real estate investment before investing.
Is real estate investment an effective long-term investment?
Investing in real estate has many advantages and disadvantages as well, so before investing in it, there is a dire need to consider them. The best investment should be profitable for long-term and real estate investment may not give prolonged benefits for the following four reasons:
High transaction cost:
When you are going to invest in real estate, the transaction cost is quite high as compared to other investments. Therefore, you need to purchase large assets of real estate in order to be on the safe side. However, its maintenance cost is also very large.
Real estate investment requires effective and continuous management to have long-term profits. But management is also costly and requires time and resources. All investors may not have enough time and resources to manage their property effectively.
Difficult to acquire:
It is quite difficult to build a well-established portfolio of real estate investments. For having huge benefits, an investor needs to purchase different assets in many different locations which may not be possible for many investors. More details here: http://www.bankrate.com/finance/real-estate/tips/default.aspx
It is not easy to secure financing for investing in real estate and you may not have enough cash to pay instantaneously. An investor will then look for loans which will lead to more debts. You will then be waiting for a property sale to pay back the debt and will lead to annoyance. Hence, real estate investments may not work for the long term. Besides this, it is always risky because there is no standard yardstick to check its overall performance. Therefore, real estate investment may not give you the desired profits and is always risky to speculate about the trend of inflation in real estate.
Real estate investment is risky because you are never sure about the rise in property value. Most investors think that their property will always rise in value, but it may not happen every time. Investors buy a land and hope that it will rise in value is a speculation instead of investment. It may lead to loss instead of profit. So while investing in real estate, always look for its pros and cons. Besides this, there are always rumors about the inflation on land property. They may not always prove true. Take into account all the risks you may face. In this way, you will be able to make your investment profitable and effective for the long term. However, real estate and personal finance is not always effective on the log-term basis.