With housing prices still down in some places, is it time to invest in real estate?
Property is highly regarded as a good investment over time. It’s one of those things with a great track record for price and value appreciation throughout history. Sure, there are times when the economy is not doing so well and the values drop. But long term homeowners are generally quite happy with the way their property values have held.
As you might guess, there are lots of reasons why investing in property is a good idea. But conversely, this isn’t the best investment for everyone. It’s much like credit card spending –- some people can control themselves with credit cards (those 0% balance transfer credit cards are tempting!) but others will spiral into debt quite easily without even realizing it.
Pros and Cons of Investing in Real Estate
So here are reasons to invest in real estate, and reasons not to.
Reasons To Invest In Property
- You want to earn an ongoing income or cash flow from renting it out. This can cover the cost of your mortgage on the property and leave you some profit on top as well.
- To improve the property and sell at a profit over the short term. If you like renovating properties, you can buy run down homes, do them up and sell them at a profit. Some people make a full time living doing this. Also known as house flipping.
- To keep and sell in the long term to enjoy money in retirement. This is how lots of people make it work –- having another property that is increasing in value can be ideal when it comes to financing your retirement in the future.
- To enjoy an investment that is not as volatile as the stock market. Investing in stocks and equities can bring good rewards in the long term, but they can also crash in a major way (unless you are well diversified and have a proper asset allocation). Property may not be as volatile as the stock market.
Reasons Not To Invest In Property
- You are nervous about overextending yourself financially. You need to consider your financial status and position before thinking about buying a property to invest in. Some people are in a better position than others when it comes to taking on an additional mortgage and more risk.
- You are not willing to take on another property other than your own home. If you want to rent out your property, there’s a little work involved. But you can get a real estate management agency to take this on for you; they will just charge a small percentage of the rent collected each month.
- You like safe investments that give a much smaller but more assured return. Let’s face it, risky investments aren’t for everyone. Some people are happy to invest in property but others think it is too risky for their own financial situation.
Where Do You Stand With Real Estate?
You will probably read the pointers above and automatically determine where you stand with real estate. Just as you find with credit cards, some people will do well with real estate, whereas others will unfortunately have bad experiences with their ventures.
In short, you need to decide where your comfort zone begins and ends. If the thought of investing in a second property fills you with dread and the expectation that everything will go wrong, then it’s not for you. On the other hand, you might find that it is the best thing you can do to set yourself up for the future.