In 2007, a lot of people were talking about purchasing houses cheaply in order to fix them up and sell them quickly. Shortly after that time in 2008, this became impossible to do; very few people were buying homes at that time. Even existing investors started to struggle between the responsibilities of paying the mortgages on their own homes coupled with the responsibility to cover the mortgages on their investment properties. In fact, many people fell into foreclosure. But luckily, this is a different time. Prices are low and bargains abound, but even with that real estate investing is not for everybody. The purpose of this article is to summarize some of the pros and cons of real estate investing in the current market.

Cons

The risk of default: The economy is expected to improve, but this doesn’t necessarily have to be the case; it can also remain where it is or even get worse. If that were to happen and investors lose their ability to make a living, they may not be able to afford the mortgage on their rental properties.

Owning rental property increases the amount of work: People who own rental properties are called landlords and they have expectations that they have to meet. When things break down on the property, they will be expected to fix them. They will also have increased liability; accidents can happen on the property and the tenants or their guests may decide to sue. To protect against this actuality, rock-solid insurance is an absolute must.

The risk of not receiving the amount of rental income expected: People who seek to rent their properties may expect to be able to charge a particular amount of rent, but sometimes they might not be able to collect the amount expected. Anyone who is not willing to take this risk may not see real estate investing as a viable option.

Pros

Investing in rental properties can provide a monthly income: Real estate investors who want to obtain a little extra money every month will find that investing in rental properties can satisfy this goal. Many people were hit hard by the financial crisis, and as such there are many people who need housing who do not have the ability to obtain a mortgage.

A house offers people an appreciating asset: In the event it’s true that the housing market is about to turn around, people who purchase a property now will be buying an appreciating asset that they will be able to sell for a greater amount in the future. Anyone who has the ability to wait until housing prices increase before selling has the potential to earn a large profit.

The real estate market is less risky than the stock market: People who have extra money to invest may be wary of putting it into the stock market because of the market’s volatility in recent years. Placing money in real estate avoids the stress of the daily ups and downs that are inherent in the stock market. Thus, real estate is a more predicable investment asset.

Summary

The bottom line is that investing in real estate can provide a steady income, but it is not without risk. Therefore, careful planning is needed before making a decision one way or the other.

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Category: Real Estate
Keywords: real estate, real estate investing, investment property, real estate investments