Real Estate has long been considered a sound investment, and 2023 is no exception. In this blog, I am going to list out some pros and cons to real estate and real estate investing. Let’s jump right in!
PROS:
- Appreciation: Appreciation is one of the most fundamental income generators in real estate. This can happen in two different way: 1) Natural and 2) Forced. Natural Appreciation happens naturally based on our economy and other homes on the market. Forced Appreciation happens when additions and/or renovations happen to a property. When you add value to the property, you are essentially forcing appreciation onto the property.
- Rental Income: One of the benefits of owning real estate is having the possibility of generating rental income. You can buy a property as a rental, house hack, live in it for a while and then rent it out, and so on. Your opportunities are endless in this current day and age.
- Leverage: Being able to leverage a property with as little as 3.5% down is one of the best deals in real estate. You can live in the property for one year, move out and place tenants in the home, and generate cash flow. This is real estate investing at its simplistic form, and it all started with only needing to put down 3.5% down on a property. There are more nuances that I am not going to get into in this blog, we can save that for another blog.
Cons:
- It takes a lot of time: My wife and I bought our first house in April 2022. Looking back in the past year, I can tell you first hand that owning real estate takes up a lot of your time. Appreciation on your property doesn’t happen overnight. Between the appreciation and everything that it takes to upkeep your property, just know that it will require time. Time is something we can not speed up or slow down, so understand everything that it takes before purchasing a property.
- HOA: Now before I get into this topic, I will say I do not currently live in a HOA community. So I am not commenting on my personal experiences, but rather other people’s experience with HOA’s. This is also not meant to talk bad on HOA communities, because I believe they can be great in certain communities, but rather I am raising awareness to potential buyers who may need this information before buying a home.
- So I recently heard a podcast this past week while doing my day job. I heard that this man was charged an extra $100 per month from his HOA. He was given no explanation or notice about the increase, it was rather shocking to him. He went on to explain all of these ridiculous (his words, not mine) rules that the HOA has on the community. He is a multi-millionaire real estate investor who lives in Las Vegas, Nevada. He wants to ask the HOA about the monthly increase, but also doesn’t want to cause a scene. He has considered moving because of the increase.
In the above example, I wanted to share an example of what could happen in HOA communities. As I have said before, they could be great in certain areas. They can provide security, help maintain property values with stricter rules, and so on. Just please be aware of the possible downside of HOA communities. As a Licensed Realtor, it is my duty to protect my client, and make my client aware of all possible outcomes.
- You can lose your investment: Homes can lose value! They don’t always go up, but rather they are more like a rollercoaster. They go up, and they go down. Depreciation is one of the biggest threats to a property. Natural disasters can also be detrimental to your property. It is also possible that your property will be worth less when you’re ready to sell, so be prepared for everything!
Closing Thoughts: The real estate market has been in rough shape in 2023. Between rising interest rates, low inventory on the market, and rising home prices, it becomes increasingly difficult to find that diamond in the rough. Everyone goes down a certain path, some take the same path as others, and some take their own path. In this current market, I encourage everyone to find which path they will take in buying a property. For me personally, in the next 1-3 years, I am looking into owning a residential property and at least 1-2 investment properties. Not sure how I will get there yet, could be my personal income, or perhaps seek out other investors to partner with. Whatever path life guides me down, I’ll follow, and I encourage you to do the same.
If you have enjoyed reading this, leave me a comment about what you liked or something you learned. Also, if you are looking to buy or sell a property in the Baton Rouge, Louisiana area, let me know! Also, one last thing, if you are looking to partner together on an investment property, also let me know!
Thanks for reading!
Alexander Kroening
alexanderkroening1991@gmail.com
563-343-3692
Alexander Kroening- REALTOR 