Co-founder of Affari Miei Independent Financial Advisory Company
November 10, 2023
You will have heard a thousand times about the possibility of invest in income-generating properties and you will no doubt have wondered whether it was a correct choice or not.
Often it is relatives or friends who advise us to invest in real estate because it went well for them or because they are a bit obsessed with real estate.real estate investment.
In any case, today we will try to understand together whether it is really worth investing in income-generating properties, so continue reading to find out more!
This article talks about:
Real estate: an Italian passion
In the investment landscape, the brick has always had a leading role, representing for many synonymous with safety and financial stability.
How many times have they told you “the brick is safe“, “the brick does not depreciate“, “a house is tangible and you see it” and many other things that have always made you lean towards choosing a investment of this type.
In part these are all right things, in part we need to do deeper reasoning.
In fact, like any financial choice, income-generating real estate investment also presents pro e against which is essential to evaluate before proceeding.
There are real estate investments and real estate investments, and they are not always the same investments, on the contrary.
Some investments may have greater potential, while others may prove to be more dangerous, or still not entirely profitable.
What is income real estate investment
Before delving into the heart of our analysis and seeing the pros and cons of this investment, let’s try to understand together what this investment consists of type of investment and above all how it is implemented.
Buy a income property it means buying a property that is already rented to third parties, and which therefore already generates income: in fact, this apartment is already providing an income that derives precisely from the stipulated rental contract.
An alternative could be to purchase a property with the intention of doing this, therefore with the plan of finding a tenant to rent our property to.
Now that we have seen the definition, let’s continue with our analysis.
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Advantages of Income Real Estate Investment
Buying an income-generating apartment seems to be an excellent investment that allows you to enjoy several advantages:
Constant Income Stream: one of the main benefits is the generation of a regular income stream through renting properties. This aspect is particularly attractive for those looking for a monthly income;
Value Appreciation Over Time: properties tend to appreciate over time, offering the possibility of a capital gain upon resale;
Credit Leverage Effect: access to credit through mortgage loans allows you to amplify investment potential, allowing the purchase of properties with a higher value than the available equity capital;
Portfolio Diversification: real estate can represent a valid diversification alternative compared to other types of investments such as shares or bonds;
Direct Control: Unlike other investments, the investor has direct control over the property and decisions related to property management.
These are the advantages that derive from making a similar investment but, as we know well, in investments there is the back of the coin and therefore we must also see what the disadvantages are or the things that could make us turn on a light bulb before going to make a investment of this type.
Disadvantages of Income Real Estate Investment
Here’s what they are disadvantages that derive from investing in income-generating properties:
Liquid assets: real estate is not as liquid as other investments. Selling a property can take time, making it difficult to quickly access invested capital;
Active Management: unlike passive investments, real estate requires active management, which includes property maintenance and managing tenant relationships;
Associated Risks: there are specific risks, such as vacancy periods of the property, non-payment of rent or unforeseen events linked to structural damage that can affect the performance;
Initial and Ongoing Costs: Purchasing a property involves significant initial costs, such as the mortgage down payment, notary fees and taxes. Added to these are the ongoing costs of management, maintenance and taxation;
Tax and Legal Complexity: The tax and legal aspects of real estate investing can be complex and often require the support of professionals, with additional costs.
My Business Opinions: is it worth it?
Investing in income-generating properties it can be an advantageous choice for those looking for a stable income and not afraid of the commitment of active management. It is essential, however, to proceed with adequate training and careful planning, considering all the positive and negative aspects that this type of investment entails.
First must have tempo to be dedicated to this type of investment as there are a whole series of legal aspects to consider which can be complex and require careful analysis and above all often must be addressed with qualified support from professionals in the sector.
Secondly you have to know that you are facing a “challenging” investment: It’s not like investing in the stock market where you choose stocks and then wait for your yield to rise, or like choosing a bank fund, handing over the money and letting the manager do all the work for you. If you buy a property you have to stay behind it and dedicate your time to make the best and most convenient choices for you.
The first choice to make concerns the property to buy: you will have to choose it well so that it can guarantee you satisfactory income and returns.
If you want to learn more about investing in real estate, in the bible on real estate investments, you will find all the answers to your questions: it is not at all easy to have positive returns always and regardless but it is necessary to carefully study the context and the type of choices that arise .
If, however, you wish to delve deeper into Affari Miei’s general approach to asset management I invite you to continue on this article.
Furthermore, here you will find a series of further introductory resources to learn how to invest successfully:
Happy continuation!
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