AN investment in real estate can provide both income and capital gains to the investor. In analysing the returns on their investment portfolio, many believe that real estate as an asset class has shown to be one of the most lucrative over the long term. It is often said, “You cannot lose with brick and mortar,” and that the best way to accumulate wealth is through real estate. Real estate can be a great investment but, as with all asset classes, understand all costs associated and avoid overconcentration. A well-diversified portfolio helps to maximise your profitability while reducing risks.
When calculating the returns on a real estate investment it is important to include all associated costs. From my experience, investors sometimes ignore costs that are not included at the time of purchase, and these do erode your actual returns/yields. These hidden or ignored costs include repairs, maintenance, taxes and insurance, among others. There is also the cost of your time spent in maintaining and repairing a property. Be sure to account for these when calculating your overall return on a real estate investment. If we simply use the purchase cost, the income generated and the price movement on a property in calculating our return, our return would be over
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