Real estate investment has been and continues to be one of the most common alternatives in Australia to invest and monetise our savings. In this article we will see the main advantages and disadvantages of real estate investment.
Real estate is one of the most popular types of investment. However, it is not easy to manage in that world, especially if you do not have a good knowledge of the market. We tell you how you can get started.
Keep in mind that If you want to know if a building or house you want to buy is still sustainable and will not cause you further trouble in the future then contact us today and we will carry out an evaluation and make sure you receive the building and pest inspection in Gold Coast you deserve. Able Building Inspections is a business that puts your necessities first and makes sure you’re making a wise decision when buying a new house or building. Contact us today!
Advantages of investing in real estate
One of the main advantages of real estate investment is that, unlike other alternatives such as investment, you hardly need training. Anyone can invest in a property and understand or calculate if the house is selling at a good or bad price, within reasonable limits.
In addition, as we have seen in Australia, investment in real estate can be a very profitable investment in some cases. However, it can also be a ruinous investment if it is purchased at prices far in excess of the fair value of the property, as has happened to people who bought apartments in Spain in the middle of the real estate bubble.
Other advantages of investing in real estate are its financing conditions, which are usually at a fairly low cost. For example, in Australia to this day you can find mortgages at a fixed rate with interests of between 3% and 4%, or even lower, which means financing at a really low cost in historical terms.
Finally, we must bear in mind that when we buy real estate we are buying the property of tangible goods, that is, goods that we can see and touch. Although in my opinion it is an irrelevant advantage, many people distrust the investment in the stock market since they cannot see or touch their shares or the companies they represent. In the case of real estate, this supposed “problem” does not exist, although we insist that for us, it is not.
Disadvantages of investing in real estate
One of the main advantages of investing in real estate are its costs:
- Financial costs related to the acquisition of the property: Taxes, notary, property registry …
- Financial costs related to the possession of the property: Maintenance costs, community of neighbours, insurance, taxes like the IBI …
- Time costs
To these costs should be added the costs for defaults and destruction of the buildings. These are costs that seem extraordinary, although they are more common than we might think.
In addition, we must bear in mind that real estate investments are usually very little liquid. This means that it can take us a long time to sell a flat or, in the case that we need the money as soon as possible, we may be forced to reduce its price significantly.
As we have seen, diversifying adequately is one of the keys to reduce the risk to our assets. It is very difficult to diversify by investing in real estate directly, unless we are lucky enough to have a large estate at our disposal. There are alternatives to invest indirectly in real estate in a diversified way if we do so through SOCIMIs. Of course, in this case we would lose in direct control of our investment.
Is it worth investing in home ownership?
We do not think it is a bad idea to invest in the purchase of a property intended for your own home, provided that it meets two conditions:
That we buy at a good price
That its cost is not disproportionate in relation to your income and your assets
It is very common to see how many people buy apartments that cannot be allowed. In the end, the house of your dreams ends up becoming the house of your nightmares. Do not forget that the apartment or house that is bought to live is not an asset, but a liability. Spending a lot of money buying your own property can be a huge opportunity cost and make our financial situation worse in the long term.
So, is it worthwhile to invest in real estate?
We’re not against investing in real estate as long as the potential for revaluation of the investment compensates for its drawbacks. Of course, despite the fact that there may be interesting real estate opportunities, in general it is not an alternative as good as the stock market to make our savings profitable, since it is less profitable, less liquid, more expensive and offers fewer opportunities for diversification.
The classical asset increases in several ways. In recent years the financial world showed us the risk of investing in stocks and funds and the traditional savings account brings almost nothing. In a short time, you will have to pay more taxes on your investment income. The solution? Invest in real estate. Even in times of economic and financial crisis many times real estate investment is profitable. The value of your investment capital increases over the long term and your property can provide you with income. Without risks So kill two birds with one stone. The result? Financial security and peace of mind.
When you choose Able Building Inspections for a professional building inspection in Brisbane, you’re choosing a business with over 40 years of experience in this field, ready to provide you with a specialised service that will exceed your expectations. Contact us toduy or visit our website and we’ll be happy to help you achieve your goals.