Category Archives: Real Estate

Pros and Cons in Making a Real Estate Investment

Real EstatesInvesting in properties in Delhi is a fruitful option if you look at it from one angle. Delhi, the national capital, lies at the centre part covered by many unique industrial as well as commercial infrastructures. Moreover with the current status, there is further increase the value of property in Delhi in the coming years. Metro rails, other networks and infrastructural developments have increased the value of real estate in this capital city. Also, Delhi is now rated as the top education centre with many great education institutions.

 

Experts say there is a large boom in the real estate market of India, that’s why there are so many people from other countries coming to India to invest. The Indian real estate market is trending towards having a great future.

In any kind of investment there are pros and cons to consider, so just because you find a con, do not be discouraged. People must of aware of both so you can decipher what is right for you and what is not.

Advantages

One of the main advantages of investing in real estate is having equity and a potential for income for the rest of your life. When you buy properties and rent them, you can make enough money to not only pay the mortgage on that house, but as a form of income. The other advantage of investing in properties is you can have a lot of leverage to get them. Many options are available to buy a property without spending all of your savings, one of which is financing from lending institutions or banks.

Tax Benefits

There are a number of tax deductions you can take advantage of if you own a property, like interest paid on your financing/mortgage, rates and taxes, agent’s fee, insurance etc. Repairs and regular maintenance done to the property can also be claimed on your taxes, especially if they can be proven to be for the safety and well being of the tenant, like roof repair, updating electrical outlets, or new plumbing. Hire a contractor like Chase NW to become your regular maintenance help on the exterior of your property. This looks really good for your taxes as well.

Regular cash income

Rent received from tenants of your rental property can be a big income. Unless you have bad tenants, your investment in an income property can return you some capital growth of that property, and the rent received from it too. This income can offset your loan repayment or even become a supplement to your other incomes. Such cash flow is only possible with good tenants, and obviously no vacancies.

 

Disadvantages

  • Liquidity

It is true; you can sell these properties whenever you want. But this may take a few months, and if there is a recession in the real estate while you are trying to sell it, you may not get what you were hoping.  In order to have a profitable deal, you have to wait till the market booms. The worst case scenario is that you sell the property just to get rid of it, and end up taking a loss.

  • Managing investment

When compared to other kinds of investments, properties are expensive to maintain and re-sell. On top of its face value, the cost of maintenance, repairs, and rent lost from vacancies need to be managed. These can all reduce your gross return to be much less than you expected when you made the investment. You can hire a professional property manager to watch over the house while you are away.

  • Rise in Interest rate

If you are going with variable interest rate, you are always in risk of economic conditions. It can raise the interest rates of housing loans. If interest rates rise, it can lead to financial distress, making you concerned that liquidity and resale can be the only option left. As the interest rates rise, liquidity in the real estate market goes dry.