Real estate investment

Investing in real estate? Some interesting points to know

Even though there is a general trend to equate real estate with residential properties alone, there are many other categories too. These include commercial and industrial properties and agricultural or vacant land to set up residential or commercial complexes. Owning real estate is considered to be an asset, primarily because there has always been a rising demand for it. True, when economic recession and downturn hits the world, price of real estate goes through the floor. But time and again it has been seen that it always bounces back to old levels and often more when economies recover.

Moreover the rate of return on investments in real estate is always higher than conventional financial instruments such as FDs of banks. However, for the uninitiated in this field, it is best to know why investments in real estate should be a preferred route amongst all other options.

Here are some interesting things that you should know before investing in real estate.

Investing in real estate is not complex

There is often a wrong perception that given the huge paperwork involved and the many laws that have to be navigated, investing in real estate is very complex. In reality it is not so. If you have your finances sorted out and have done adequate research on selecting a property there is little risk of overpaying for it or buying a dud one. Valuation and inspection and other due diligence should be entrusted to experienced property lawyers who are well versed with both Federal and State laws. For example, if you are buying property in the State of Victoria, you will do well to get in touch with PB Lawyers, a property law firm based in Melbourne.

Control over your investment

Unlike other forms of investments, that in property offers a high degree of liquidity and many options. You have control over when to buy, where to buy and when to sell. If you have bought residential property you can go in for large scale additions to the existing structure or renovations thereby increasing its curb value. Selling real estate might take you about a couple of months for the deal to materialise but you will always get good value for it. On the other hand, stocks and shares and securities are more volatile with great fluctuations in price almost on a daily basis. These instruments are strongly linked to economic indices, emotions and news whereas real estate is much more stable in nature.

Breaking even on investments

Real estate is probably the only investment option where you get all back over time, breakeven and start earning profits. When you rent out the property, it is your tenants who are paying down your mortgage while all the time you see your original investment appreciating in value. Another benefit is that you can claim a wide range of tax deductibles on your investment property. It will not only reduce your tax bills but also put surplus funds in your pocket through enhanced cash flow. Get a good accountant to guide you and you can cut down thousands of dollars in taxes through your investment property.

Predictable and recession proof investment

While it is true that property value to a certain extent is volatile, it is not to the extent of stocks and securities. With real estate, your investment is insulated from fluctuations for at least the next 18 to 24 months while value of stocks may change every few seconds on the exchanges. A reason why property is often thought to be recession proof is because it fulfils a very basic need and that is housing. Even in most difficult times, people will still need a place to live and will forgo other luxuries to pay rent and mortgages.

These are some of the things that you should know before investing in real estate. It all boils down to the fact that property is a blue chip asset and will give you a high rate of return at most times.