Investing in Real Estate? Know the Upsides and Downsides!


It’s essential to know the pros and cons of a piece of real estate, it. Experts love to put their money into property. How come? What do they know about real estate investment that most of us don’t?

All real estate investment platform options have their own pros and cons. This is important if you want to know how much risk you need to take with each investment. The amount of risk experts take when they invest in real estate varies. Most investors can only put between 10% and 70% of their portfolio into real estate investments.

So, how do we decide if our exposure should be 10%, 70% or somewhere in between? This will happen when we understand the pros and cons of investing in real estate.

The Pros of Real Estate Investment

We all know the benefits of real estate investing and that it can be profitable. It’s one of the kinds of investments that can really bring in a steady stream of passive income. Here are the essential reasons why you should buy an investment property:

Enables Asset Diversification

Real estate has almost no direct relationship with equity, debt and other popular paper-based assets. In fact, it has a difficult relationship with things like stocks, gold and other valuables. This means that the first benefit of real estate is that it helps you spread out your assets. The growth in value of a real estate portfolio has little to do with the growth of other types of assets. When the stock market is doing badly, it is common for real estate to do well. Even if an economic boom is coming to an end, real estate would still be a good investment.

A Quick Dual Income

Like stocks, real estate also gives you the chance to make more than one income. Dividends from stocks are a quick way to make money. In the short term, you can get rental income from real estate. But rental income is much more stable and easier to plan for than dividend income. Long-term, both stocks and real estate can help your money grow. Stocks can deliver quicker appreciation. In the long term, the value of real estate increases more slowly but steadily.

Grand Inflation Hedge

When you add up rental income and value growth, they beat inflation by a long shot. Real estate property is the only investment that consistently beats inflation. In fact, it’s not fair to think of real estate as the only way to protect against inflation. If you invest your money in real estate the right way, your returns will be much higher than inflation.

The Cons of Real Estate Investment

Aside from its other problems, the fact that it is so “price intensive” is the one that stands out the most. On the one hand, a normal investor needs only Rs. 500 to buy stocks. But if you want to invest in real estate, even Rs. 50,00,000 may not be enough.

Also, because real estate is a fixed asset, it’s not easy to buy and sell. How? It’s not simple to locate a property in the area you want. It might not be easy to find buyers in the area where the property is. Also, there are some other major problems with investing in real estate:

Applicable Capital Gain Tax

On a higher-priced sale, capital gains tax applies. A short-term capital gain tax is levied when a property is sold within three years of acquisition. After three years, a 20% long-term capital gain tax applies (after indexation).

Increased Cost

Real estate investing needs a lot of capital. Due to hefty capital requirements, buying and selling property is difficult. This is why so many people get real estate loans.

High Maintenance Cost

Comparatively, real estate has substantial management expenses. The owner must maintain the internals and pay for general maintenance costs. This improves property prices.

Choose an appropriate commercial property investment company and make your investment accordingly!