Pros and cons of being long term real estate investor defined
Being a realtor investing in real estate you must know for how long are you holding the deal before offering it on open market. Here, the investor may decide to hold a portfolio in his (er) ownership for six months or beyond. The investment of six month is categorized as short term while long term may continue holding ownership of a real estate from one year and onwards. The short term investment is an aggressive approach or quantitative approach in economic terms while long term is a slow and steady approach also called qualitative approach. Long term investor is usually called a lazy or part time investor who believes in quality of life, has other resources for survival and does need to be a market player all the time.
Though long term real estate investor lives a heartbeat away from end customer but unlike customers doesn’t develop emotional attachments with properties (s) he owns and may sell them on first good offer. Our article Pros and cons of being long term real estate investor defined will drive you through all you need to know for a shift or to carry on with same real estate investment strategy.
The following are major pros or benefits long term real estate investment approach
- Requires low investment
Long term investment is a futuristic approach where an investor operates to seize opportunities of a long run and are more like to be located in distant locations and away from center. This gives him an edge to seize the opportunities with much lower investment and can even acquire them on a promissory note or instalments. The low investment requirement for long term investment is an edge over short term who needs to buy properties in hot locations only.
2. Steady Rental Income
A short term investor has to sacrifice the rental income and needs to offer the deals on market at earliest. This is not the case with long term investor, (s) he enjoys the ownership and rental incomes for very long. Long term investment is the best option for salaried persons with low investments or who needs rental income in addition to meet their monthly expenses. Check best paying properties in town for steady rental income with michni, change the city according to your interest.
3. Exposure to lower risks
Increasing prices, higher bids, capital financing, selling in loss and exposed to potential frauds are the few prominent risks that keeps an investor of short term awake in bed. The long term investor trades higher returns and all associated risks for quality of life and enjoys every moment of it.
4. Lower Investment Cost
Commission percentage of the real estate agents, advance tax, Capital gain tax, Community tax, GST, book keeping, Capital Cost and transferring fee are a few costs associated with real estate investment. Higher the investments, higher the associated costs is a simple phenomenon and by avoiding such scenario, the long term investors keeps the cost at much lower end.
5. Long term ownership pays off well
A property if shortly offered in open real estate market may offer well but is definitely going to offer better if kept out of market for long. With long term investment strategy, the investor along with rental income, also enjoys much higher ROI on a single investment when finally offering the property on open market.
The following are Cons of long term real estate investment approach
6. Lower Returns on investment
A futuristic investment approach slows down circulation of money, contributing less in economic activities and thus results in reduced lower returns on investment (ROI) than a short term investor. A short term investor is always packed with bulk of cash and make tons of profit in comparison that makes his (er) ROI far above than a long term investor.
7. Exposure to inflation of money
The inflation of money is highest tread associated with long term investment. The investor must have to check current market offerings of his (er) asset, the invested principal amount and the growth in inflation rate of money every year. If the inflation is greater on investment amount than growth than inflation on same amount, the deal is a net loss.
8. Annual Property Taxes and community charges
The annual property taxes and community are the costs an investor of long term holdings must bear while a short term investor remains free of all such costs.
9. Maintenance cost
Any property must be maintained and upgraded from time to time. An investor with long term holding must have to bear all these additional costs and should count them in his investment before offering his (er) asset in open real estate market.
10. Liquidation of asset
An investor with long term holdings enjoys ownership of solid assets and gains rental incomes in addition to value addition in his asset value but remain short of liquid cash. The liquidation of asset in needed in emergency might be much higher than anticipated. Additionally, shortage of liquid cash may keep such an investor away to seize immediate opportunities that otherwise can be availed.
A marketing mix or mixture of both strategies can benefit a real estate investor and can overcome drawbacks of both. an investor can also associate himself with a group or can hire an investor manager to keep kicking his (er) ROI in right direction.
If success is a process with a number of defined steps, then it is just like any other process. So, what is the first step in any process?