Before you begin investing in real estate, you should always research to make sure it’s what you want to do. Although there are tons of benefits to real estate investing, like many things it also has its cons. To help you make an educated decision on whether or not real estate investing is for you, we created this article outlining the pros and cons.
Let’s start out with the positives.
Real Estate Investing Pros
The following benefits are just a few of the big reasons why people get into real estate investing.
1) Steady Cash Flow
As long as the property is being rented, you’ll be getting steady cash flow every month. Depending on the rental market, and the bills each month, you can end up with a solid amount of income.
One of the best parts of real estate investing is that you’re able to create leverage with other people’s money. By leverage, we mean that it’s possible to buy an expensive piece of real estate using your own money only for the down payment and sourcing the rest of the payment through a mortgage. If you get the building filled with tenants who are paying rent, then you’ll be able to use their rent to continue paying the mortgage. You’ll be using their money while growing your own investment.
Unlike many other investments, real estate investing gives you full control. It’s up to you where the money goes and how much money is spent. As you’re the one making the decisions, if you know how to employ strategy in a competitive market, you’ll be able to quickly grow your investment.
Real Estate Investing Cons
As with any type of investment, real estate investing has drawbacks of its own. Before you decide to proceed, it’s important to understand if you can handle the downsides and potential risks.
1) Initial Cost
Even though you can create leverage with other people’s money, you do need to have enough for that initial investment. If you don’t have enough for a down-payment, then you won’t be able to get started. You should also have enough to be able to pay for bills while you’re trying to find tenants. It’s also important to consider that, depending on the state of the building at purchase, you may need to pay for some repairs or upgrades before people can move in.
2) Learning Curve
If you don’t already have the essential knowledge in real estate or rental markets, then get ready for a bit of a learning curve. Going into real estate investing before learning much about it is a recipe for disaster. If you want to maximize your chances of being successful, you’ll want to spend time learning before getting fully involved in it.
One of the biggest setbacks for many people in real estate investing is dealing with the tenants. Although it’s always possible to have an easy time finding tenants who are respectful, it’s just as possible to have people living in your building that are hard to deal with. Whether they just don’t pay on time (or at all), or cause damage to your property. However, luckily for you – you get to pick your tenants, so you can meet with them and make sure they are the right fit for your home.
If you’re choosing to pursue real estate investing, then it would be a great idea for you to dig deeper and learn how to do well with real estate investing. It’s also a good idea to hire a real estate agent as they will be able to give you expert advice throughout the process and help you choose your first property to invest in!