Question

Investor goals and motivations differ in the real estate market. Discuss the advantages and disadvantages of investing in real estate, especially in today's market. Review local listings, newspaper advertisements and articles. Then describe the condition (buyer’s market, seller’s market, etc.) for your local market. In which direction is this market moving? How long do you think it will be before your local market changes, and why do you think so?

Answer 1

Ans. Advantages of investing in Real Estate:

1. Real Estate Can Be Easier to Understand

2. Real Estate Is Improvable

3. Real Estate is a Hedge Against Inflation

4. Real Estate Properties Exist in an Inefficient Market

5. Real Estate Can Be Financed and Leveraged

Disadvantages of investing in Real Estate:

1. Real Estate Has Higher Transaction Costs

2. Real Estate Has Low Liquidity

3. Real Estate Requires Management and Maintenance

4. Real Estate Markets Have Significant Inefficiencies

5. Real Estate Creates Liabilities

Real estate is a distinct asset class that is simple to understand and can enhance the risk and return profile of an investor's portfolio. On its own, real estate offers competitive risk-adjusted returns, with less principal-agent conflict and attractive income streams. It can also enhance a portfolio by lowering volatility through diversification. Though illiquidity can be a concern for some investors, there are ways to gain exposure to real estate yet reduce illiquidity and even bring it on-par with that of traditional asset classes.