Important Reasons to Invest

Important Reasons to Invest in Real Estate

For most of the people investment in real estate seems profitable and beneficial whereas for some it seems risky. Though both perceptions are right somehow, because investment in real estate demands a good amount. On the other hand, it seems risky because one cannot afford to lose their savings by making wrong decisions.

According to research, investment in real estate is a good option in many ways. One of the major reasons for investing in real estate is it gives a profitable outcome, again it depends on one’s research regarding investment options. If they do extensive research before buying any particular property which majorly includes location, is this area suitable for long term investment or short term investment, authenticity of that particular land, availability of amenities and facilities etc. The article given below will discuss everything about the reasons to invest in real estate.

A good source of income

Investment in real estate is a good option for those who want fixed monthly income. This can be only done if one buys a house or a triple story building and gives it to multiple families on monthly rent. This opportunity is best for those who are worried  about their income after retirement and don’t want to burdenize others with financial requirements.

Appreciation

The possibility for gain is one of the most appealing aspects of real estate investing. While other assets you acquire, such as cars, may depreciate quickly, real estate often appreciates greatly over time. Now, it’s vital to remember that appreciation rates will vary greatly from market to market, but historically, you should expect a 3-5 percent increase on average. On the surface, that doesn’t seem like a lot until you consider the asset’s value. Although the appreciation will be based on the asset value, unless you paid cash for the property, your actual return on your cash investment will be significantly larger.

Diversified Portfolio

Another advantage of real estate investing is the opportunity for diversification. The link between real estate and other main asset classes is modest, and in some circumstances negative. This indicates that adding real estate to a diversified asset portfolio can reduce portfolio volatility and increase return per unit of risk.

Real Estate Investment Trusts

If you want to invest in real estate but aren’t ready to take on the responsibility of owning and maintaining properties, a real estate investment trust may be a good option (REIT). On major stock markets, you can buy and sell publicly traded REITs. Many trade at large volumes, allowing you to enter and exit positions rapidly. REITs are required to pay out 90% of their earnings to shareholders, therefore their dividends are often greater than those paid by other equities.

Conclusion

Despite all of the advantages of real estate investing, there are some disadvantages. One of the most significant is a shortage of liquidity (or the relative difficulty in converting an asset into cash and cash into an asset). A real estate deal can take months to finish, unlike a stock or bond purchase, which can be completed in seconds. Even with the assistance of a broker, finding the proper counterparty can take several weeks.

Apart from this disadvantage, real estate is the best option for investment because it gives multiple perks to its investors including monthly , annual income, appreciation and a diverse portfolio. All these factors are important reasons for investment in real estate.

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