When it comes to a reliable investment vehicle, few other investment categories compare to that of real estate. Keep in mind that investing in real estate is really no more complicated than buying and holding stocks and bonds. Making your first purchase in terms of a real estate investment can be rewarding, exciting, and impressively profitable.
Cover Expenses Until the Mortgage has Been Paid-off
Land ownership as well as investing in rental properties is a unique and active way of putting assets to work to generate steady residual income. Keep in mind that when investing in real estate it is important to calculate how much rent is required to cover all the costs associated with the base asset. In many instances a landlord or property manager can charge above and beyond the cost of operating an asset to generate a monthly profit. Conversely, there are many cases where property management requires that only enough rent be charged to cover expenses until the mortgage has been paid off in full.
Once Mortgage has Been Paid-off
The good news is that even taking this latter approach results in a mortgage eventually being paid off completely resulting in most rental income being pure profit. This of course does not take into account the cost of maintaining the property once a mortgage has been paid off. Either way, the end result is a substantially impressive return on investment over the short and long-term. As an added bonus, as many real estate investors know, real estate historically has almost always appreciated in value over the course of paying off the mortgage. The end result is that the property owner ends up with a more valuable asset.
Big Impact on Overall Profitability
With all these positive benefits in mind it is also important to note that there are sometimes challenges when it comes to managing and maintaining real estate. For example, there are cases where tenants may end up damaging property or situations where a property goes unoccupied or un-rented for an extended period of time. This can have a big impact on overall profitability and must be taken into account when investing real estate. Whether it is commercial properties or simply purchasing residential homes, one thing is sure and that is that investing in real estate as an asset class in general can be incredibly profitable.