Brief History of the Benefits and Hardships of Real Estate Investing
Advantages of Real Estate Investing
There are a handful of advantages to investing in real estate over stocks and bonds. One that seems too simple is that real estate is simple to understand. Here is a property located in this location. There is an asking price of X amount of dollars for so many square feet of property. It can be easier owning property than owning stock. Stock prices are guided by the market and economy: what it was last year and how much it made, what products the company issued in the previous year. Also, the investor is concerned about if the management changed and are all the partners the same as last year.
Property Value Depends Upon Location
If you live in a large metropolitan area on the west coast, it may be easier to find a nice home on the beach. Remember that the prices will be higher because that is one reason people choose to move to the west coast. Many people want a good beach property. A real estate agent looking for a specific kind of property can find great help through REIA Los Angeles. Only good things can happen if an agent goes through this organization. They can gain advice and knowledge from those with experience.
Disadvantages of Real Estate Investing
One of the disadvantages of purchasing property over stocks is the cost of the transaction. An investor can log into his Fidelity, Schwab, or E*Trade securities account and purchase his stock within a few minutes with a low cost for the purchase. If he has a RobinHood Investment account, he can even make his purchase without paying a fee for the transaction. On the other hand, when a property is purchased, many more documents have to trade hands, and the prices are much steeper.
Unexpected Added Expenses
If a real estate investor wants to make a profit by flipping a house, there are even more fees and costs attached to the overall purchase of the property. We are not referring to features that are considered historical or national landmarks, but those that would be available to most realtors wanting to purchase and resell a property.
Information is Easy to Acquire
In other words, there is a lot less hassle to get to the bottom line of why a property is doing well or poorly at anyone time. If the real estate is a rental property, the price will depend upon where the property is located and if it is prime real estate or not, high-rise or one-story, or previously owned or new. There will also be some changes when you figure in the fees taken by the brokers, sellers, management company, etc. A stock or bond is much more complex to figure out since it has many more variables.
Management and Maintenance
After you purchase shares of stock, you can set your hold, stop, or sell order and let the algorithm do the rest of the work for you. When you purchase a property, you will need to manage and keep the property maintained. Also, leases have to be drawn up, lawyers have to be consulted, outside developers and crews have to be coordinated with the maintenance done on the property. There is a significant number of hands-on work that has to be done.
Delegated Property Management
Someone can hire a manager for each property so they can take care of more significant issues, but at the beginning, dealing with a property is very intensive and takes plenty of time. For stock, you will need to return to it at the end of the year and transfer all of the figures you receive for you principal broker and transfer it to your tax forms or hand it over to your tax people. If you own the property, and it hasn’t been sold or leased, there are city and local taxes that have to be satisfied.
A big concern for large property owners is caring for the property during a time when the property is not being used. Having security and keeping squatters and vandals out are just a few problems that make the owner of properties more difficult. The need for security that can patrol a property is essential to keep a property from being vandalized. Security is a safeguard but also an added cost.