Getting started in Real Estate- Read This

Considering Real Estate Investing? 5 Pros and Cons

Are you looking for reducing your overall investment risk or creating a consistent income? Then invest in real estate (adds diversity to your investment portfolio).

Some real estate investing options are real estate investment trust (REITs), passive like holding dividend-paying stocks, investing in syndication through PPM, real estate funds and directly buying the property.

People hold and buy rental properties for passive income, cash flow, tax benefits, and capital appreciation.

Let's face it, like any other investment; real estate is a lot more exciting than owning a share of a stock of paper. We are saved from the daily fluctuation of the stock market.

Here are some of the pros and cons of real estate investment:

Advantages of Real Estate Investments

1. It Appreciates Over Time

Over time, the rate experiences annual inflation. Yes, you can always get a chance to buy quality property at a discount, make improvements to increase equity, and eventually sell for profit. In multifamily, this is called force appreciation or value creation.

Real estate is equivalent to the stock market mantra, which always has an intrinsic value (buy low and sell high).

Property is a tangible asset that always has a value derived from both the raw and the "improvements."

2. It Has Unique Tax Benefits

Real estate allows investors to grow their wealth over time, and the government also offers tax benefits to real estate investors.

Depending upon your income level, there are good chances that your rental property will give you and may offer tax deduction against your other income.

With active involvement and appropriate knowledge, you can make more money with depreciation and cost segregation.

3. It Also Allows You to Use the Leverage

Investing or Investment made in real estate holdings helps to accelerate your wealth-building results.

Leverage is a decisive advantage of real estate if used wisely widely. It is also used to borrow capital to purchase or income the potential return on investment.

For Example: If you are initially investing $30,000, you can get all the benefits of owning - an asset worth $150,000.

Note: If done with proper diligence, one can build better investment with low volatility - using leverage, especially in the low-interest rate market.

4. It provides a Steady Cash Flow

Real properties or apartments gives one a steady income called "cash flow." This extra income is money left after paying all the bills.

After acquiring the property, cash flow provides monthly income passive income, allowing you to spend the rest of your time investing in more real estate, tour & travel, or family.

5. It Gives You Control

Investment in real estate gives you the advantage of getting out of the rat race. Real estate gives you a lot more control to mitigate risk and grow your portfolio at a much faster-leveraged pace. You are always sitting in the driver's seat for making a lot of decisions.

Disadvantages of Real Estate Investment

1. It requires a lot of money & investment

For making money, you need to invest money.

Once you buy a real estate property, you will need to make a down payment plus closing cost and money to repair, taxes, insurance mortgage payment, and investment. You can also invest passively into multifamily or any other asset class as an LP via a PPM offer or a real estate fund.

2. It calls for a long-term investment

Real estate is a tangible asset that is always bought with a long-term strategy. You need emergency funds separately to support emergency needs. The property takes time to resell, and the transaction cost is higher than the selling stock shares.

3. It may have unique risks

Before Investing In Real Estate, You Must Identify A Few Of The Risks:

• Buying the wrong property at the wrong time
• Increase liability for the accident may occur on your property (of course you have insurance for that).
• Getting stuck with Professional renters (A management company can handle that). Important to learn about the state and city laws that govern eviction.
• Works the legal system at your expense
• You make monthly payments - maintenance cost, unexpected repairs, property vacancies, property taxes, etc.

4. Benefits may not always apply

Some of the tax benefits may not apply; before investing in real estate, always consult a tax professional.

5. It can be problematic

If you own a rental property, your cash flow may suffer a significant hit if you end up renting to a tenant who doesn't pay, leaves your property in poor condition when they moved out, or both.

It is good to partner with a competent partner to help avoid some newbie mistakes. You can also start investing passively to have someone manage the acquisition, due diligence, and operations of the property while you collect the cash flow.

Purchase Property Wisely and Strategically

Real estate is a strategic investment for busy professionals (doctors, healthcare professionals, engineers) who understand hurdles and risks. If you are looking for study grows passive income, we suggest you learn, evaluate, and purchase/participate in good real estate deals.

Always remember to take help from professionals who can provide competent services at reasonable prices.

Steady growth is brought through wise choices!

Chander Mishra MD MBA CPC is a multifamily sponsor syndicator invested in over 1800 units. He is a founder of Blue Ocean Capital LLC.  Blue Ocean Capital LLC Reach us @ [email protected]