Investing in real estate has remained a highly profitable practice. This happens when you possess the patience to hold onto a property for long periods and reap property appreciation. Although, some people have had their deals go wrong and lost all their investment. Is it worth investing in Real Estate? Let’s discuss some of the pros and cons.

Pros of investing in real estate

Real estate can be bought below market prices

It is possible to acquire real estate at a fair price, mostly when the seller wants to quickly get rid of their property. Reaping from such an anomaly needs a deep knowledge of local costs and which real estate is the best to commit to full-time.

Real estate can generate steady cash inflows.

The owner generates steady cash through monthly rent payments received when properties are rented out. Various properties may also have additional charges, like dryers and washers, parking, and storage. This will depend on the offsetting outflow of cash for property taxes, mortgage payments, and maintenance.

Real estate provides a depression tax shield.

Various depreciation costs that may be claimed by investing in real estate comprise no outflow of cash but minimizes the amount of taxable income. Hence, protecting you from paying a portion of taxes would otherwise be due. Presently, residential real estate owners have a depreciation period of 27 ½ years, whereas commercial buildings have 39 years.

Real estate appreciates.

Depending on where the real estate property is located, it tends to appreciate. It is also dependent on the level of local demand. Although appreciation can vary within a short distance, when real estate is chosen wisely, it appreciates substantially over a long period. Making repairs on real estate can also elevate the value of your property.

Cons of investing in real estate

Despite having many advantages, investing in real estate also has various disadvantages.

Real estate income might be variable.

It is possible that you can lose your money over a certain period. This is experienced when you receive a small down payment which causes enormous mortgage payments. During the soft demand seasons, there is a possibility that you won’t raise the rental rate as you wish or hardly have any people to rent.

Real estate is impacted by rent control.

When investing in residential real estate, the local government might impose controls on rent, which causes the limitation on raising the rent. Although you can apply to the rent control board for an increment in rent, such requests are typically accepted grudgingly.

Real estate is time-consuming.

Real estate investment demands a significant amount of time. Time is needed when studying the neighborhoods that you wish to invest in, identifying prospective opportunity investments, and handling issues with maintenance.

Real estate income is subjective to taxation.

The income generated from real estate deals gets subjected to taxation. They are subjected to state and income taxes, which at times can be substantial. However, there are moments when profits generated from real estate are not subjected to tax immediately.