In many nations, including Pakistan, investing in real estate, and then transforming it into a revenue business is a common practice. Many people consider it a simple way to make extra money because all you have to do is follow the ‘buy and hold technique. However, this isn’t always the case. When purchasing a business property, there are various variables to consider.
You should also read about Rudn Enclave.
Professionals believe that investing in real estate is the finest thing you can do with your money, but many individuals disagree. They argue that property investment is the best location to lose money. Surprisingly, both seemingly contradicting pieces of advice are correct.
The real estate market has been performing exceptionally well in numerous countries. Many shareholders have been attracted by it, not only because of the potential for high returns but also because of the appealing corporate and work conditions it provides.
Property investments, like any other economic enterprise, have both positive and negative aspects. Before investing your money, you should first understand what you’re getting yourself into. Even though most new and growing firms lack the financial resources to purchase property, renting business premises may be a preferable option.
Merits and Demerits of Investing in Business Property:
Property investments have both benefits and drawbacks, and the outcome relies on the circumstances, decisions, and fortune of each investor.
Below are some merits and demerits of investing in property that will be providing you with a better understanding in this case:
Merits of Investing in Real Estate:
ADDITIONAL SOURCE OF INCOME:
One of the most effective ways to profit from your investment is to rent it out. After deducting tax and upkeep fees, you’ll still be able to make a respectable living without doing anything. You can spend on property and make money right away by renting it out. The rent may be increased over time, or you may sell the property at any point if you require a large sum of money.
When compared to other markets, the property has shown to be a relatively solid investment throughout time. Yes, there are highs and lows, but the real estate market is less unstable than other investments like the stock market. This could be evident because realty takes longer to sell (although stocks can be traded in a fraction of a second) and is often in high demand.
As compared to other alternative investments such as equities, property investment has fewer dangers, especially when done over a lengthy period. In most strong property markets, housing prices rise every year, and capital gains increase with time. As a result, the longer you keep your property, the larger the profits will be, implying that the risk will be lower if you choose this plan.
GROWTH IN CAPITAL:
Property investment in a developing area has the potential to make you wealthy. Home in a high-traffic area will almost certainly create higher profitability than just land in a rural one. Property is popular as an asset because it may be a good long-term investment for many people. They aren’t creating any further land, so securing your piece of property now will allow you to reap the rewards later.
Whenever it comes to tax advantages, real estate is fantastic. You can claim a variety of tax benefits. If you’re making losses on your investment portfolio, you can deduct it from your income and save money on taxes. Deduction on fixtures and fittings can also be claimed, increasing your tax savings.
Demerits of Investing in Real Estate:
LACK OF LIQUIDITY:
Properties take longer to sell than shares, which can be sold at any time. Depending on the neighbourhood, selling your home might take weeks or months. If you really need to retrieve your money fast for other purposes, this deficiency of liquidity can be a disadvantage.
COST OF MAINTENANCE:
It’s also not a one-time transaction where you only have to pay once. You must be concerned with total prices as well as monthly rates. Furthermore, property maintenance, i.e., sewage, painting, roofing, power supply, and telephone, is not cheap.
DISPOSING OF THE LAND:
Unfortunately, property investment is not a convertible investment, which means that it may take time to sell the property depending on the economic conditions. If you’re making a short-term purchase, it could be far more difficult. You may be charged realtor fees in connection with the sale of your home. Then there’s the property transfer tax. All of these costs will, unfortunately, reduce your return on investment.
DIFFICULT TO MANAGE TENANTS:
One disadvantage of dealing in income-producing property is that tenants, even the greatest, might quickly disappoint you. Every landlord’s worst nightmare is a nonpaying renter. That explains why this stream’s income is never assured. If you opt to let or sublet the building, handling renters and any development purpose risks might be a hassle.
Muhammad Zaeem Khan, a creative writer, ardent to compose fine writings. Having vast experience in writing blogs, articles, descriptions, and in reviewing scriptures. Currently, works as sr. content writer with Sigma Properties & Marketing.