| Real estate can be a lucrative investment. Before you | | | | It is a reasonable assumption that few other |
| plunge into it, understanding the advantages and | | | | investments can benefit as much as real estate can |
| disadvantages is important. The advantages of real | | | | from the input of management expertise. Imaginative |
| estate investment are discussed here. | | | | and good management has a little effect on most |
| 1) Security of income | | | | other types of investments. The management of one's |
| Most types of real estate investments such as offices, | | | | overall portfolio of stocks is crucial but the stock |
| apartments, shops, factories and even vacant land are | | | | market investor generally can have little effect on the |
| able to provide a regular source of income in the form | | | | individual publicly listed companies whose shares he or |
| of rent through leasing out the property. As rents are | | | | she has acquired. Sound management, on the other |
| generally contractually fixed for a term of years, such | | | | hand, can add considerable value to a real estate |
| as three years with an option to renew at the | | | | asset, while the lack of it invites disaster. |
| prevailing market rent for another three years, there is | | | | 4) Estate building through refinancing |
| a certain degree of security of income at least during | | | | Building up an estate or property investment portfolio |
| the term of the lease. Hence, whilst the stock market | | | | may be a vehicle for becoming wealthy. Once an |
| tends to be highly sensitive to short term changes with | | | | investor's equity has increased through capital |
| prices rising and falling generally across the board and | | | | appreciation and repayment of the loan taken, the |
| sometimes very rapidly, property rental income and | | | | original property can be refinance to free cash that |
| thus values tend to lag behind such short term market | | | | can be used to buy a second property, or the |
| fluctuations. | | | | increased equity in the original property may be used |
| 2) Security of capital | | | | as a collateral of security for a loan to buy a second |
| Property offers one of the safest form of | | | | property. By refinancing a property investment and |
| investments in terms of security of capital as it is | | | | reinvesting these funds in more properties periodically, |
| durable, has a long economic life and for some types | | | | an investor can accumulate a large property portfolio |
| of properties is relatively scarce. Moreover, whilst a | | | | over time. |
| building may be destroyed by fire, the land on which it | | | | 5) Pride of ownership |
| stands is indestructible and generally appreciates in | | | | The personal satisfaction derived from an investment |
| value over time. In fact, because property is durable, | | | | is especially important in real property. For many |
| there is added security in that while an investor in | | | | investors, property ownership retains a mystical quality, |
| stocks and shares may lose all his capital if the | | | | with a value that defies measurement. Owning a |
| company goes bankrupt, such a situation is unlikely to | | | | private residential unit is generally regarded as a status |
| occur in property investment. | | | | symbol. |
| 3) Value gain | | | | |