Like any investment tool, there are pros and cons to investing in real estate. In real estate investing, you either purchase a property to earn a profit by reselling or renting out the property. Investing in Canada can be profitable if you understand the laws that apply to real estate investment.
Before investing in real estate, one should always take property taxes into consideration because they will vary depending on which city or state the property is purchased in. Therefore, one should always consult with city officials before investing in property. Here are four advantages of investing in real estate:
#1. Diversification Value
The positive aspects of diversifying your portfolio in terms of asset allocation are well documented. Real estate returns have relatively low correlations with other asset classes, which adds to the diversification of your portfolio. Basically this means that even if your other investments are tanking, your real estate investment is likely to move be stable.
#2. Ability to influence performance
Real estate is a tangible asset. As a result, an investor can do things to a property to increase its value or improve its performance. Property managers can decide to improve both the interior and exterior of a building, and re-tenant it with higher quality tenants. An investor has a greater degree of control over the performance of a real estate investment than other types of investments.
#3. Income Stream
If the property is easily convertible to rental units, the owner could earn a steady income stream in the form of rent. Rental earnings can be quite significant depending on the demand for housing in the area and the value of your property.
#4. Real estate is improvable
In contrast to investment tools such as stocks and bonds, real estate investments are directly under your control. Though you cannot control demographic and economic changes, you can control many things relating to physical properties and tenants. With good management of your overall real estate portfolio, you can tangibly improve the value of your investment and build wealth.