The Pros and Cons of an Investment Property
It is a well-known fact that with any investment comes significant risks and benefits and how important it is for an investor to properly weigh those risks and benefits before making a decision. It is only logical for an investor to have proper knowledge about the investment; in this case the property beforehand to help minimize the risk. Now let’s take a look at some of the pros and cons of a buying an investment property.
2 Pros to buying an investment property:
#1 The investment is stable
Real estate investments are actually considered to be more solid and more stable compared to some other forms of investments such as stocks and shares. Although the real estate market has its ups and downs, if you are looking for a solid long term investment it is generally your best bet, as housing and properties are always in demand. Canada’s population has grown so much and continues to grow especially in the bigger cities resulting in a higher demand for housing and properties.
#2 You get a regular monthly income
Once you have a steady tenant you will know exactly how much money you will be getting every month in rental income, allowing you to make plans for that money. Some other kinds of investments may pay out less often or the income you get from those investments may be less predictable, which can make it harder to make plans for the money if you don’t know how much and when the money will be coming in on a regular basis.
2 cons that come buying an investment property:
#1 Property investments are not very liquid
Properties take longer to sell, whereas stocks and shares can be sold within a moment. This is an advantage as well as a disadvantage. The state of the real estate market in a particular country/city usually has a huge impact on the length of time and the price a property will sell for. Also, factors such as the overall condition and area the property is located in can also have a huge impact on the amount of time it will take to sell the property.
#2 Hidden problems
Getting a professional to do a home inspection on the property you’d like to buy before you purchase it, is VERY important. You want to make sure that the property in question is really worth your money. Even after your initial inspection, it is likely that you may find things that are wrong with the property, that weren’t brought to your attention on the inspection report. Unless you are buying a brand new property sometimes when purchasing a home there are some renovations or repairs needed which can end up costing the investor more money, if not properly budgeted for.
The bottom line is this, there are always going to be risks when it comes to real estate investments, but there are also great benefits and the investor can either end up losing money or wining big time. It is recommended to properly weigh all of the risks and benefits beforehand and keep in mind that you will require a deposit of at least 20% down when buying an investment property. So take some time to go over your options with a professional before making your final decision.