Having real estate in your investment portfolio can give it major value. This is especially true if you choose your real estate wisely. You need to understand how to measure the benefits you expect to get out of your investment. That’s the only way to ensure that your ROI is truly worth the time, effort and money.
7 Benefits of Investing in Real Estate
1. Higher Returns
Real estate gives you the ability to accomplish higher returns that many other portfolio investments. Adding property investments to your portfolio allows you to decrease risk while maintaining steady returns. This is especially true for investment property, which brings in monthly returns as well.
2. Ability to Influence Value
Since real estate is known as a “tangible asset”, as an investor, you have the ability to improve its performance and/or increase its value. Some activities that make this possible include: installing a new roof, upgrading the interior, adding room additions, expanding the property’s square footage, and replacing low-quality tenants with higher-quality renters. Real estate investments give you much more control over performance than most others investment types.
3. Yield VS Risk
When real estate is added to your investment portfolio, you get the chance to accomplish higher returns for a given portfolio risk level. On the other hand, though, adding property to any portfolio gives you a chance to decrease portfolio risk as you maintain steady returns.
4. Rental Income Returns
When buying rental property, you need to weigh out the expected rental returns before making the investment. The amount of rent you receive is directly affected by current rental market values, as well as inflation indexes. You can increase a tenant’s rent at the end of the lease term, according to local renter’s laws and regulations. Either way, be sure you know the rental return rate before buying the investment property.
5. Management Costs
Buying real estate means dealing with regular maintenance costs as they arise. However, with investment property, there are two levels of ongoing maintenance you must maintain:
- Property management is required in order to deal with the daily operations of maintaining the real estate.
- Strategic management is needed in order to accurately track your investment’s long term position in the real estate market.
These functions can be combined for handling by one property management company. Or, if you have the experience, resources and time, you can manage these functions yourself.
6. Leasing Market Cycle
This market consists of real estate properties available for or currently being leased to tenants. Leasing market conditions are directly affected by the following:
- Supply – Amount of vacancies or space available
- Demand – Amount of space needed based on amount of tenants
When demand rises, vacancies drop. This results in space scarcity, and a rise in market rents.
7. Investment Market Cycle
When it comes to the investment market, the demand comes from investors who have the capital needed to make real estate investments. On the supply side, you’ll find real estate brought to the real estate market by individual owners. As property prices rise, demand is met by bringing new properties to the market.
Making a Lucrative Real Estate Investment
When it comes to the private market, no major benchmark exists to help you compare the results of your investment portfolio. Plus, it’s not that easy to measure expected risks in relation to current market conditions. However, with the right research, you can ensure that your investment brings you the highest ROI possible.
Interested in buying investment property in Park City, Utah? Turn to the Park City Realtors you can trust at Jensen and Company today.