Pros & Cons of Purchasing Investment Property
The pros and cons are different depending on the type of real estate investment that you make, but for today, we will focus on the pros and cons of investing in physical real estate.
Pros:
+ Consistent, slow growth: The past year, housing prices have definitely accelerated with double digit growth over last year. But with the rise in interest rates, housing predictions for 2022 and 2023 are still expected to grow, but not at the same rate as in 2020 and 2021 (see chart below).
+ Flexibility in how you use the property: Whether you want to live in the property part-time and rent it out short term via Airbnb or find a long term renter, it's really up to you. You may want to rent it out long term first then move to short term if it's in a location you want to live in. Whatever it is, you have the choice to determine how to monetize the property to fit your current lifestyle.
+ Earn "passive" income on the side: Yes, it is technically passive income, however, I put passive in quotes as sometimes, it does require active management (more on that in the first point of the con section). When you purchase an investment property, one of the main things you look for is cash flow each month: does the rental income you are receiving cover all of the expenses associated with the property? This answer should be yes and it will allow you to pocket a few hundred dollars on the side.
+ Build equity to leverage in the future: One of the biggest benefits of investing in real estate is the ability to build equity. As you continue paying the down payment, you build equity in your property, which you can leverage later on to either buy more property, fix up your existing property and more.