Are you thinking to make an investment in real estate to earn a handsome return on investment (ROI)? Or, are you trying to invest in a tangible asset to receive fixed income every month or year? At the same time, if you’re a risk-averse person and don’t want to invest your money in the equity market, real estate investment is the best option for you in that case.
However, the question is why investment in real estate is a wise choice? We have got you covered if this question has also crossed your mind while considering real estate as your investment option. This article will inform you about the real estate investment pros and cons in detail. So, let’s start our discussion!
PROS OF INVESTMENT IN REAL ESTATE
1. THE SAFEST INVESTMENT
Purchasing rental properties is the safest and the most secure investment of all investments. Nurture your returns by investing in the right kind of real estate. If you invest in a property whose value is expected to rise in upcoming years, your returns will rise as property valuation always goes up with an upward trend.
Similarly, if you want to exit from property investment, you can sell it at any time at higher prices. On the other hand, you can buy a residential and commercial and earn high returns on investment by receiving a fixed stream of income every month. So, we can say real estate investments is the safest of all investment types in Pakistan.
2. A GOOD HEDGE AGAINST INFLATION
Pakistan is a country suffering from high rates of inflation. For example, the current level of inflation is more than 10%, and it is expected to increase in the upcoming year. It reduces the value of your money, and you can buy fewer and fewer commodities with the same amount of your money every year.
In other words, inflation eats up your savings and money, ultimately reducing the value of your money. Fortunately, property investment provides you with a secure inflation hedge where the value of your property rises in value every year. As a result, it increases the value of your investment vis-à-vis inflation rates.
3. PERMANENT STREAM OF RETURNS
Buying a property brings a permanent source of income. You can buy-to-let property to earn a fixed income monthly or yearly. Other investments like equity, commodity, and term deposits provide you with returns based on market fluctuations.
So, the profits earned from these investments have more volatility and fluctuations, providing you with an undetermined amount of income. However, the real estate market has low-level low levels market oscillations. Ultimately, you receive a specific and fixed profit on your investment.
4. TAX BENEFITS
Moreover, investing in real estate saves you from many property taxes in Pakistan. For example, property tax exemption is provided by the Federal Board of Revenue (FBR) when you transfer or receive property in inheritance as a gift or estate. Moreover, you can enjoy tax benefits when you receive a rental income of up to a certain amount.
On the other hand, if you are a tax filer, you will enjoy the tax rebates and other tax benefits in the form of reduced tax levels. So, real estate investment is one of the best kinds of investment if you don’t like to pay higher taxes. Overseas Pakistanis can invest in real estate projects enjoying the tax benefits. Check an investment guide for overseas Pakistanis.
5. REAL ESTATE INVESTMENT OPTIONS
Real estate investment offers best investment options to investors. You can buy property in different sizes, shapes and at any time. For example,
- Residential Property
- Commercial Property
- Purchasing Files
- Real Estate Investment Trusts
Similarly, you can invest in real estate or put your house for sale, depending on your investment goal. For example, you can invest for different purposes, which could be to earn higher profits. On the other hand, you can buy property to rent it out later.
- Buy-to-sell property (Flipping Properties)
- Buy-to-let property
- Buy-and-hold property
Before making any concluding decision, you must be clear about your investment goals. Your goals help you take your investment trajectory and make your investment relatively smooth and hassle-free.
6. Lower Level of Risk
Last but not least, a lower level of risk accompanies property investment options. However, you must invest a considerable amount of your time and effort hunting the valuable and right kind of investment. For example, you must complete your proper homework while deciding.
- Credible realtor
- Location of the property
- The authenticity of the real estate property
- The just value and price of the property (It must not be overvalued)
- Real Estate Market Knowledge
- Real estate market insights
- Verify the property documents
If you have checked the above list and ensured to verify each of the above points, you will allow yourself to bear the least possible risk in real estate investment. However, you’re likely to make losses if you ignore any of the above points in the checklist.
CONS OF INVESTMENT IN REAL ESTATE PROPERTY
The cons of investing in a property are limited and could be overcome by adopting a suitable and best strategy. It all depends on the insight, level of effort and experience of an investor. However, you can avoid most of these cons to some extent.
- Illiquid asset
- Selling of a property demands time
- The costs of maintaining a property are higher
- Real estate requires your time
- You may be oblivious to the just valuation of a property
Finally, we can say that the property investment is the best option for those investors who are risk-averse and want to own an asset completely. Moreover, you can transfer or sell your property at any time. On the other hand, investors can beat inflation by investing in a precious property.
Maintaining your property and using it for different purposes provide you with a hassle-free and convenient way of investment. You may sell, hold or flip your property at any time. You may observe that the pros of investing in real estate are more than the cons of buying a property. However, if you adopt the right strategy and make an investment in real estate, you will earn handsome returns.