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By urban living | ESSENTIALS | 4 Jul 2014

Investing in real estate – What you need to know

Buying real estate and investing in real estate has become more and more popular over the last 50 years and has become an investment vehicle. Despite the fact that the real estate market offers a lot of opportunities to make substantial gains, buying and owning properties is more complicated than investing in stocks.

Firstly, The owner of the property, the landlord, is responsible for paying the mortgage, taxes, and costs of maintenance. Ideally, the owner charges enough rent to cover all of the costs mentioned. A landlord may also charge more to produce a profit, especially if the property has appreciated in value over the course of the mortgage, leaving the landlord with a more valuable asset. According to the U.S. Census Bureau, real estate has consistently increased in value from 1940 to 2006, then proceeded to dip and rebound from 2008 to 2014.

Secondly, the disadvantages of renting a property. You can end up with a bad tenant who damages the accommodation or, worse still, ends up having no tenant at all. That leaves you with a negative monthly cash flow, meaning that you might have to scramble to cover your mortgage payments. Thirdly, there is also the matter of finding the right property; you will want to pick an area where vacancy rates are low and choose a place that people will want to rent.

To sum up, it is advisable to consider your abilities, and the time to invest in managing your properties. Then determine the suitability of the property for your purposes. Finally, try to calculate the financial viability of a property and compare them. If you invest in a rental property, many responsibilities come along with being a landlord. When the furnace stops working in the middle of the night, it’s you who gets the phone call. If you don’t mind handyman work, this may not bother you; otherwise, a professional property manager would be glad to take the problem off your hands, for a price, of course.

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