Real Estate Investing

Advantages and Disadvantages of Investing in Property


Adnan Ul Haq

Module 3:Real Estate Fundamentals and Rules

Advantages and Disadvantages of Investing in Property

Adnan Ul Haq

Advantages and Disadvantages of Investing in Property

Everything has its pros and cons, so do real estate investments. Here we are going to discuss some advantages and disadvantages of real estate that will help you decide whether or not you should invest in it. 

Advantages of Investing in Real Estate

    • God’s Money and Insurance Against Inflation

God's money always increases in value. When its worth goes up, it acts as insurance against inflation - protecting you from inflation. 

    • Equity Building

If you take a loan to buy a property, the equity in the property will increase over time. This is because you are putting money into the property, and the value of the property goes up over time.

For example, if you take a loan to buy a property for 1 crore rupees, and after 4-5 years, the property is worth 2 crore rupees, then your equity in the property will have increased by 1 crore rupees.

    • Generational Wealth

Many people pass down their property to their children or grandchildren. This is called generational wealth transfer. So, if you invest in real estate you will not only benefit yourself but your future generations as well. 

    • Hard to Lose

Real estate is hard to lose. You can sell it in an instance and regret it later. Or no one can steal it from you easily. 

    • Easy to Manage

Real estate is easy to manage. You do not have to put in a lot of effort or resources to manage real estate. It is not like you have to visit the site daily or have to pay maintenance charges every month. 

    • State Benefits

The state will give you benefits in the tax form. There are various schemes and policies in this regard. For example, if you hold your property for over 2 years, you have to pay no or lesser taxes. However, this is impossible with other assets- every month, you have to pay taxes. 

    • Passive Income

Another benefit of investing in real estate is that you can receive passive income every month. So, you don't have to work and still get money. This also decreases your retirement age. 

    • Easy Lending

Banks can give you a loan more easily to buy a property. This is because the values of properties do not depreciate, banks also know that they are lucrative assets. So, they give you the loan easily. 

Disadvantages of Investing in Real Estate

    • Require Money

You need money to invest in real estate. Oftentimes, people lack the huge sum of money required to buy a property. Though the profit margins are huge, the initial investment is also high. 

    • Takes Time

Like any other business, it takes time for a property to generate profits for you. This is because the value of properties appreciate with time and after then you can sell it to get a profit. 

    • Wrong Timings Block Money

When you invest in a property, it's important to do so at the right time. If you invest at the wrong time, your investment will be stuck, and it will be harder to sell. If you buy at the right time in the price cycle you will not be able to get a huge profit thus you will always find yourself waiting for the right time to sell the property. 

    • Buying and Selling is Stressful

It can be difficult to buy and sell properties. There are a lot of technicalities involved and sometimes things become risky. So, buying and selling properties can be difficult. 

    • Property Frauds

The main disadvantage of buying property is the risk of property fraud. This can be reduced by creating a checklist and checking all the documentation carefully with the help of the checklist. In Pakistan, it is a very common fraud.

    • Construction Issues

Some construction issues, like roof leakage, boundary cracks, etc exist. That's why it's important to check the developer's credibility. Make sure to review his past projects and see if he has successfully completed those projects or not. 

    • Research Well

The importance of research cannot be overstated - if you do good and thorough research and take your time while analyzing the property, then this will lead to more opportunities for success in the future.

Though there are some risks associated with investing in real estate, they can be managed. Additionally, the benefits of investing in real estate are greater than the risks. This is because real estate helps you make safer investments, as compared to other assets.