Why Real Estate Investment Is Not For Everyone
Buying that first house is a big deal for many of us. Making it a home and expanding our family give the place more life and character, and we sort of get attached to the place, too. While we all cherish those sentiments attached to our home and love it for emotional reasons, did you ever think if it is a good investment? The general idea is that a real estate investment is the best kind of investment. With affordable loans and no dearth of moderately priced homes, it has become even easier. However, many would beg to differ, and there are solid reasons for them to think in that way.
Low Profit Yield
It has been found that even if you buy real estate just for investment purposes, it is not as profitable as some other kinds of investment. For example, most properties give back lesser or equal amounts in 30 years when compared to a fixed deposit. In fact, even if real estate prices are higher than usual, a property can barely beat inflation in a span of five years. Even if you put it up for rent that pays somewhere between 2%-5%, the returns would be lesser than an FD and an EMI you are paying every month. Also, this asset doesn’t have a proper index to measure its performance, and real estate can be highly unpredictable. Prices in one particular area can fall or rise depending on the location.
High Maintenance Charges
The amount of money you spent on the upkeep, taxes, and insurance for every property you own can often make a big dent in your bank account. On top of that, if you have tenants, you have to bear extra costs on keeping everything in good shape as well as cleaning up the place before a new tenant arrives. Compared to other assets, real estate needs a lot of TLC which can be quite taxing at times.
Challenging Landlord Responsibilities
Most of us think that buying a property and putting it up for rent is probably the easiest way to earn passive income with minimum effort. Well, we are quite wrong. Being a landlord is not an easy job. You do think that you are holding the reigns here, but it is quite the opposite. If your tenants are not good, be prepared for a number of surprises that may leave you with a throbbing headache. Remember, they are staying in your property, and if they are not happy with you, they can actually damage the place badly and call it an accident. If you involve a property management company, then you end up paying them 8%-10% of your monthly rent. Also, some of these companies are not too helpful in times of emergencies.
Tough Property Management In Another State
Buying and renting out properties close to you is still easy. But if you want to invest more and want to take it out of the state, think again! It’s a big challenge to travel to and from your property in another state to ensure that everything’s going great. If you trust someone to take care of it, you would need to pay them as well. So how much do you have left for yourself at the end of the month? Not much, right? Also, you would need to know about local plumbers, electricians, and roofers which can be extra work, especially if the ones you know of are unreliable. Without knowing how adept they are with their jobs, it would be difficult to trust them with your property.
Most agents are only concerned about the amount of commission they are making out of any particular business deal. If you want them to work well for you, they would need to understand the whole concept of investing. Relying on agents to sell a house can work but not while buying one. The research work needs to be extensive, and it would be stupid to leave it entirely to an agent. With that said, it’s more extra work for you yet again!
If you are serious about investing, there are other ways to do it. You can always learn from the experts and can start with small amounts, unlike real estate where you would need a hefty amount right in the beginning. If you are new in investing, there might be other ways for you. However, it doesn’t mean you can’t venture in it at all. With the right kind of expertise, it is totally possible!
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