In the business of buying and selling real estate, people often wonder if they should opt for buying more or selling the property options, while the answer to this thought is multi-layered, it is necessary to highlight that the top experts suggest that one should choose to invest in property and holding it rather than selling options. In other words, most of the experts prefer to buy as much property as they can as the asset rather than selling option. However, if you are someone who is in the dilemma of buying or selling the property, it is important to analyze all the aspects in a systematic manner and this article will guide you to make the right choice by providing you the main advantage of buying property over the options of selling it.
Source of Income
In terms of the return associated with the real estate investment, the stocks or equity appreciation is quite good. This means that the real estate investment is beneficial when it comes to buying or selling the property. For example, if you invest in the property, it is expected to provide you decent cash flow in terms of renting an apartment and getting the monthly cash of the lease. In other words, one will get the stable return on the monthly basis.
Role of Depreciation
Although the strategy of flipping the real estate is often preferred by the experts in the industry, however, it is often overlooked that the tax issues associated with it will create more problems for you in the longer run. While if one evaluates the merits and demerits of the buying property and keeping it to generate revenue, the merits outweigh the demerits of flipping. Many experts believe that the cost of buying a property can be covered within a specific period of time in form of rental benefits one can have or if one decides to reside in the property. This means that the role of depreciation can be overcome with the help of maximizing the merits of keeping a property. However, it does not imply that you can rid the demerits of the tax applied to the property. But if you are an active investor, the merits can help you to take advantage of the Tax Reform Act of 1986.
The factors which provide one with the leverage are uncountable when it comes to the real estate. For example, if you live in a house which is on the mortgage, the disadvantage of paying it back may take a long time than the expectations. However, if you are someone who knows how to pay the mortgage without disturbing the saving or utilizing the money for personal expenses, the process of paying back the money can become restively easy. For example, in some cases, people rent the property to the tenants, who can pay the amount of money one is expected to pay as mortgage. However, if you have a type of loan which has no interest on it, the amount can be easily returned after you have bought and saved money. Similarly, more than 15 of the loan can make up for the principle of the loan, which will eventually contribute in equity one is expecting to receive on the particular property.
Even though the prices of the real estate may fluctuate over the periods of time, however, many of the homeowners have become slightly paranoid due to the financial crisis of 2007. It is important to mention that the close survey of the real estate history depicts a positive picture if one takes into account all the factors. For example, the past trend reflects that the property prices have increased over the years. In simple words, the equity is seen accelerating and the equity for the property investor has soared at a fast rate if the time of keeping a property goes beyond a certain period of time. On the other hand, some of the experts believe that stock market investment is safer than the property investment, which is not completely accurate, as the leveraging rate of real estate is roughly five to one stock. And the leverage rate of stocks is quite low in the backdrop of loss or crisis.
The main logic behind the preference of real estate over the stocks has got to with the higher gain one gets to have when it is compared with the principle investment, while the stock market benefit is considered higher, however, the benefit is not very concrete or tangible enough. In simple words, the perks of stock investment may seem better; however, if you are looking for tangible return, the investment in real estate trumps the stock investment. Some of the advocates of stock investment may underline the risks associated with the real estate investment, but, if one reviews the volatility of the stock market with the property investment, the argument seems flawed or shows a contradictory picture. In addition, if one considers the risk attached to the real estate investment, the cash flow one receives would still dominate or cover the risk factor involved in it. Furthermore, research shows that the prices of houses have gone back to the level before the recession of past decades. Hence, if you value the positive cash flow or benefits, the risks or fluctuations in the real link can also be managed.
Efficient Market Hypothesis
According to the advocates of the efficient market hypothesis, the chances of surpassing the market are slim due to the efficiency of the stock market which may drive the share prices to take into consideration all the related information or facts. It is often used as an argument to underline the merits of the stock market as well. However, if one take into account the crisis of 2007, the theory seems implausible. As the theory exaggerates the case, the efficiency of the stock market is a fact; however, it is not always efficient in the real sense. For example, the information of stocks is readily available to a particular investor, however, ample information on the companies is also accessible, but, the crisis of 2007 showed that the interpretation of the information processed by the number of investors or those with all information may not be very reliable.