Investment real estate involves purchasing property with the intent of earning a profit. New York real estate investors do this in multiple ways, such as becoming a landlord and earning income from rental payments. Alternatively, an investor may renovate a property and earn a healthy profit when they sell. Depending on the investor’s goals, and the types of properties they invest in, different strategies may come into play.
Benefits
Like any investment strategy, real estate has both upsides and downsides. One of the first benefits that draw many investors to consider real estate is that it can diversify an investment portfolio. If someone is already investing in the stock market, they may want other opportunities to strengthen their general wealth. Another potential benefit is that investment in real estate can increase a person’s regular income. This is particularly true for investors who become landlords or who invest in commercial real estate. The other major benefit for many investors is that property value tends to increase over time naturally, which feels like a lower-risk investment plan to many.
Drawbacks
There is a lot to learn and understand about investment real estate. The time investment involved in learning things like local real estate law and financial structuring can turn away some investors. Another potential drawback is that investment real estate usually requires a large initial investment. The stock market is an easier access point for investments than real estate. It can also take a long time to see returns. Owning any real estate usually involves a lot of work. If an investor plans on becoming a landlord, this includes managing tenants or possibly employees to take on some of the work. There is also upkeep on the property.
Alternatives to direct investment in real estate can mitigate some of these drawbacks. Instead of earning income on rentals or by way of price appreciation over the years, many investments look into real estate investment trusts, real estate ETFs, real estate mutual funds, and real estate investment groups. Like any investment, these strategies still have positives and negatives, but can lower some of the risk involved.