A profitable and valuable real estate investment will not only provide a steady source of income to the investor, but also build his/her wealth through asset appreciation on a long-term basis. Having an experienced and knowledgeable investor is critical to understand the unique characteristics of your real estate investments will help you to devise a profitable approach. Moreover, understanding how to utilize the best features of your portfolio is what will make you a thriving investor in a competitive city like Destin, Florida. . But what actually make real estate investments unique as compared to other types of investments? Here are six unique features:
Real estate investments if handled properly can become exceptionally durable and able to create several sources of revenue generation. A real estate investment has no fixed maturity unlike other types of investments. You can retain the investment for several years to come, or even sell out within a few days of acquisition if there is profitable offer in the market. Consider some unique investments in the U.S. that have been in possession for several decades, while few exclusive investments have been acquired by the same family or trust for centuries in some European cities.
2. No Transparency
Certain markets like commodities and stocks, tend to function on transparent basis. Investors have clear access to real-time market facts which enables them to make drastic amendments to their plans and portfolio.
In the case of real estate industry, it is otherwise. Whenever an investor wants to acquire a property, there is a probability the seller is containing some information or even he/she may be unaware of the issues relating to the property.
Considering the need, a thorough research and many on-site inspections are vital before deciding to purchase the asset. While purchasing an unseen property in situations like an auction, it’s better to include the high risk of uncertainties and several issues into the decision-making process.
Each real estate investment calls for unique features when it comes to location, price, and structure. To cater to the need, investors tend to gather knowledge from the local community in accordance with managing highly profitable and diversified portfolio of investments. It’s not a surprising fact that many experienced investors tend to hire a local team in each location for their investments to gain as much help as possible from the heterogeneity nature of this industry.
A real estate investment is taken as illiquid due to its inability to sell immediately and saving the owner from a considerable loss in value. Even if you want to flip a property, it will cover a significant length of time to buy, apply renovations and additions, locate an interested party, and close the deal. And if you are owning a rental property with residing tenants, the process is only going to get prolonged.
However, the illiquidity factor is a favorable one, especially when it pertains to investment in real estate. The lack of liquidity will only stabilize and appreciate the asset over time, which is the best case scenario for long-term investors.
5. High Startup Costs
The costs involved in initiating a real estate investment is higher in contrast to other kinds of investments. Normal costs will include purchasing and closing costs, rehabilitation, and financing. Remember in order to make money you have to invest, and the same concept applies for real estate markets too.
Similar to illiquidity, the high startup cost is the reason property investment is such an exciting prospect for investors. However, the soaring costs do limit the number of investors entering some high-investment markets, even though the rewards are promising in terms of high cash inflow.
6. Vulnerability in Investments
The risks involved in real estate industry run hand-in-hand with the high rewards that tempt potential investors. The fluidity of investment markets tend to change with to the geographic differences as well. In this sense, real estate investment is not a one-time effort, but rather requires constant acknowledgement and engagement in order to stay abreast with the ever-changing trends.
Several top investors may either handle their investments personally, or tend to hire a real estate expert or team to manage all the details and specifications relevant to their properties.