MICHAEL DINKEL | BENEFITS OF REAL ESTATE INVESTING
Michael Dinkel says that long-term returns on real estate have the potential to be quite large. It offers a consistent cash flow and has several tax advantages. Here are just a few of the many benefits real estate has over other types of investments. Rental accommodation is in greater demand.
Property is unique among the other asset classes that are open to both small and large investors. Contrary to traditional investments, real estate investing has its methods, benefits, and risks.
Michael Dinkel says that the real estate market is influenced by a whole separate set of variables, such as capital formation, economic performance, and supply concerns, which results in a low correlation in price behavior relative to other asset classes.
LOCATION
A building's market value is significantly influenced by its location.
Property investments are likely to be kept for many years, during which time the allure of a particular area may change—either for the better or worse. For instance, if a city is undergoing reconstruction, people will probably perceive the area more favorably. Michael Dinkel says that a sizable new commercial center development can make existing tranquil residential homes less desirable.
PHYSICAL CHARACTERISTICS Theworthofabuildingwilldepend onitskindanduse,suchasan officeorashop.Theutilityis intendedfortheadvantagesan occupierreceivesfromusing buildingspace.Depreciationisthe riskelement.Allstructures deterioratewithtime,but developmentsinconstruction technologyortenantneedsmight alsomakebuildingslessappealing. Forinstance,thestandardsfor theneededbuildingareahave alteredduetotherequirementfor asignificantamountofunderfloorcablinginmodern metropolitanoffices.
TENANT CREDIT RISK
The rental revenue you may anticipate from owning a building will determine its value. The owner loses the rental money if the renter fails. However, there are other factors to consider besides the possibility of a complete default. According to Michael Dinkel, the selling value would probably be lower than it otherwise would have been if the tenant's credit quality were to considerably worsen while the property was owned.
LEASE LENGTH
Another significant factor to take into account is the term of the leases. Even in turbulent market conditions for the property, the rental revenue is guaranteed if a building is entrusted to a high-quality tenant for an extended length of time. One of the appealing aspects of real estate investment is this. Given the importance of the lease's duration, it is crucial to take it into account when purchasing because it is the time when the property is most likely to see new occupants.
LIQUIDITY
All real estate assets are substantially less liquid than the majority of bonds and stocks. In typical market conditions, property transactions are delayed and so illiquid. Finding a buyer will take considerably longer in a weak market. The cost of inaccuracy in real estate investments is substantial. As a result, although a bad stock investment may be sold right once, a bad real estate investment may need a lengthy and upsetting procedure to reverse.
TAX IMPLICATIONS
The investor must also pay property tax and stamp duty in addition to income tax, which must be paid on capital gains and rental revenue. The investment return one anticipates from a property might be impacted by the stamp duty and property tax, which vary from state to state.
HIGH COST OF INVESTMENT
The value of a real estate is high in comparison to other types of investment. Michael Dinkel says that due to its nature, real estate investing is out of the grasp of the majority of people. On the other hand, stocks and bonds may now be bought in as little as one share, enabling portfolio diversification despite decreased costs.
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MICHAEL DINKEL
