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Updated by Joanna James on May 19, 2020
Headline for Why Invest in Real Estate? – A visionary investment
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Joanna James Joanna James
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Why Invest in Real Estate? – A visionary investment

In this modern world, saving the money you earn will not just be enough. This is where investing plays an extremely important role and it has many benefits inherent to it. One of the most attractive investing types out of all is real estate investing and here are some great benefits out of it.

1

The rental yield

Say you invest in some apartments in Colombo, Sri Lanka. This is a real estate investment, and what you get as the benefit is the direct rental income. Generally, the net rental yield takes all components such as expenses, taxes, and other costs into account and the gross yield does not. So, investors generally prefer the net yield as a practice.

2

Appreciation

With the effects of inflation, the values of rental properties generally go up. This is a common scenario in Sri Lanka as well. If you invest in a reputed and promising investment property the likes of John Keells Properties, you will not have to have any doubts about your invested property not being appreciated. When the value increases, it can provide investors many positive directions such as reinvestments in higher-value properties or a better sale.

3

It is inflation-proof

When it comes to rental charges, they normally increase with time. That says, rent always increases with the inflationary impacts and this is good news for the investor. Yes, he sometimes will have to pay the mortgage expenses for holding the property, but it's a fact that mortgage payments do not increase or decrease with time. As they remain stable, his cash inflows are increasing and this is good protection when the economy faces inflation.

4

Leverage

Well, leverage is both a blessing and a curse. But, if the investor knows how to manage his financials, leverage can never be an issue. Although there are some inherent (yet avoidable, if acted upon wisely) risks of leverage, there are many great returns for an investor. If an investor has $100,000 with him, he can either invest them on leveraged assets by purchasing 4 properties with down payments or else, use that entire amount on one property by settling it fully.

5

Benefits through property improvement

Have you ever noticed that some investors do not invest in all-good properties all at once? Instead, they buy a property that needs a certain amount of improvements here and there, then they repair them or improve them using their financials and thereafter sell the properties at a higher rate? It is a wise investing method nowadays, and more often, the expenses incurred for repairing by the investor gets covered by the selling rate. In Sri Lanka, it's a practice of the real estate investors to get houses that are for sale at lesser rates (probably due to some issues) and then work on increasing the property equity. They sometimes groom the gardens, and fix air conditioners inside, and then sell them at very high prices.

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