Real estate tends to occupy most of the portion of people’s wealth. The volume of real estate market makes it attractive for many investors to invest their investment. But whenever we talk about investment there comes the thought of profit but the question is that is real estate investment is capable of providing this lurking demand of profit ? While there are many other investments are available which are considered to gain profit at different scales. Let’s make a comparison between real estate investment and other investments which are considered to gain profits.
Stock: investors tend to invest in stocks to earn increased profit if the company proves profitable enough. Stocks also provide a chance to create a diverse portfolio and investors can invest their capital in multiple companies to gain maximum profit while Real estate investment provides environment where involvement of risks is less then stock investments and also real estate is approachable to almost every person because of available knowledge where stock market has more complexities.
Bonds are reliable investments involved low risk and investors can earn revenue if the interest rate is not fluctuated also rate of inflation can affect this investment while Real estate investment is not affected by the rate of inflation and variation in interest rates.
Certificates of deposits also involves low risk investment but provide low profits due to interest rate fluctuation and taxes, while real estate investment is much more secure from these impacts .
Similarly investing in precious metals like gold is another type of investment but high risk is involved due price variations and it requires long wait to sell it and earn profit while real estate results in cash flow.
Another investment REITs is thought as a real estate but both differs from each other. REITs tends to buy shares in real estate companies without owning properties and have dividends less than two percent, while in real estate investment the investors have opportunity to manage a property directly by owning physical property.
It seems that with innovation, technology and change the real estate investment will make itself the most profitable investment throughout the globe. The future picture of real estate investment will be enhanced to a level where most of the benefits will surge in real estate market with technological revolution. Real estate is true growth and income investment.
Tax-deferred compounding of value: In real estate investment you do not pay tax on the gained profit until you sell your property and even avoid paying taxes after rolling over another property.
Regular cash flow: By owning your property you have money coming in every month in the form of rents. Particularly larger multi-unit complexes such as coin operated washer and dryers. When you own investment, you also expect to incur expenses, including your mortgage payment, property tax, insurance and maintenance, the revenue coming in and expenses going out will realize you positive operating profit each month.
Reduce income tax bills: For income tax you also claim an expense that is not really an out of pocket cost depreciation because it reduces your income tax bill and hence increase your cash flow from property.
Increase of rental income over expenses: your operating profit which is subject to ordinary income tax should rise as you increase your rental prices faster than the rate of increase for your property’s over all expenses.
Despite all its potential real estate is going to face some challenges now and in the coming time as mentioned earlier that vast development in technology and growing scope of real estate tends to benefit globally every individual so these caveats will be tackled through a proper medium but these factors can never be ignored in real estate which can cause damage to this investment
Few home runs: real estate is not lucrative at all times for all people. Your likely returns from real estate will not approach home runs which are achieved in the business world.
Upfront operating profit challenges: At early stage of investment the operating profit may be small. In the worst cases property owners lose both investment and their homes.
Ups and downs: Although you have a potential for viable profit but you are not going to earn 8 to 10 percent every year like stocks and other types of ownership investment, real estate goes through ups and down periods.
High transaction costs: by selling a property within a year your profit may be wiped away by the high transaction costs.
Tax implication: Last but not least, on your gained profit the federal and state governments are waiting for their shares in the form of taxes.