Real Estate Investment:
The present real estate market appears to be in good shape with increasing volume of sales and soaring property prices. Market experts are predicting 2016 as favorable for real estate investment since prices will continue to increase throughout the year and mortgages for buying property are currently available at low rates. In order to turn you real investment into a long term successful business, you must opt for rental real estate investment and avoid house flipping. There are some important advantages of earning returns through rental income over earning returns through house flipping. Here in this article we will discuss the various advantages or rental property investment and why investors should opt for it.
First let’s find out the basic difference between rental investment and house flipping. Rental investment is a type of long term real estate investment where the investor buys property and provides it on lease to tenants. House flipping on the other hand is a kind of short term real estate investment where an investor buys a home and sells it in a short span of time at higher prices after modifying and renovating it. Dividends earned from rental real estate are far less compared to house flipping where the returns can be significantly higher. However certain elements of rental property investment makes it a superior kind of real estate investment over house flipping.
3 Major Advantages of Rental Property Investment:
Fixed monthly income: Unlike house flipping where income or investment returns are temporary, rental real estate investment is popular among many investors for providing fixed monthly income. In house flipping the scope of earning returns is limited as once you sell the property you are no longer the owner and the profit you made by selling is your final income. In rental investment your property goes on being rented and therefore you will earn dividends on a monthly basis which is much comparable to the monthly salary of a job without the constant work.
Immune to economic downfall: Rental investment is immune to economic downfall and market fluctuations. This is because the rental rate of a property doesn’t decline the way its actual price declines during market downturns. Since rent doesn’t change you will earn the same amount of dividends from you investment which is not possible in house flipping as property prices go down during recessions.
Long term benefit: One of the biggest benefits of rental investment is the advantage of acquiring total possession of the property after you have recovered its value through rent. The money you invested while buying the property will be recovered at a certain point in time in the future from the rent. Thus after you earn the amount you invested initially you will enjoy complete ownership of the property and any extra income from that property will be an added bonus.
Thus with fixed monthly income and immunity from most market fluctuations, buying rental property is a more convenient kind of investment compared to house flipping.Read More