Real Estate as a Cornerstone
of Investment Planning

From a purely financial stance, the bulk of assets owned by the human population takes the form of real estate. The role of the housing sector as the mainstay of wealth stems from a bunch of factors. 

To begin with, just about everyone wants to live in safe and comfy surroundings. For this reason, most people are willing to pay a hefty sum for a desirable abode. As a result, the cost of housing – whether the property happens to be rented or owned – usually takes up the biggest chunk of the household budget.

Another factor lies in the economics of ownership versus rental. Since the value of real estate tends to climb over time, the net worth of the owner rises. By contrast, the only impact on the renter is the privilege of shelling out more money to the landlord.

In many cases, the value of real estate tends to grow faster than the upturn in the average level of income throughout the population. The competition for the choicest locales heats up over time as the denizens have more money to spend. 

Yet another driver lies in the favorable treatment of home ownership as a matter of public policy. In many countries, the government encourages the citizens to buy rather than rent their dwellings. 

An example of favorable treatment lies in the reduction of income taxes through the deduction of the interest payments on a mortgage. By contrast, the cost of renting a home does not qualify for the same type of perk.

Another key factor concerns the boosted gain resulting from the leverage supplied by a mortgage. A simple example involves a buyer who puts up only half the cost of a house and borrows the rest from a bank. If the price of the property were to rise by, say, 10% then the homeowner enjoys a capital gain of 20% on their initial outlay.

For a variety of reasons, then, the wealth of the homeowners tends to burgeon over time. As a result, many people get the impression that real estate is an easy way to build up a nest egg. 

On the downside, though, a lot of folks don’t realize that the ease of amassing wealth in the housing sector applies only to a personal homestead. When the owner of a property turns into a landlord, it’s a completely different ball game. 

As it happens, renting out a property is a business like any other. Actually, the setup is worse than many other types of enterprise. The landlord faces a welter of rules and fiats that limit their freedom of action along with the right to protect their own interests.

To begin with a counterexample, the publisher of a magazine can refrain from sending out subsequent issues to any subscriber who does not pay their bill. In a similar way, a shopkeeper can eject a rascal who vandalizes the store or employs the products without paying for the merchandise.

On the other hand, a landlord does not have such a broad set of rights. As an example, in many countries round the globe, the tenant can stay put for months or years on end even if they are unwilling or unable to pay the rent. 

In many parts of Europe, for instance, it takes about 3 years or so to evict a tenant by due process of law. But that is only part of the sticky story.

The clincher against renting out a property lies in the right of the tenant to open-ended occupancy. Under certain conditions, a squatter may have full tenure for an indefinite period; the law prevents the landlord from throwing out the cadger.

The moral of the story has several parts. For starters, the prospective investor has to do their homework with a great deal of diligence. An initial step in this direction is to seek out trusty information from virtual portals on the Internet as well as tangible sources in real space. 

In pursuing a program of due diligence, the crucial factors to consider include current conditions as well as future prospects. An example of the former is the affordability of the property in relation to the average wage in the locality. An instance of the latter is the outlook for economic growth for the district as well as the country as a whole. 

Another task of the investor is to discuss the opportunities with a financial advisor as well as a tax expert. The purpose of the huddle is to examine alternate ways to implement an investment project. 

An example in this vein is the acquisition of a property by buying it directly as a private individual, or indirectly by way of a holding company. The appraisal of each alternative has to cover a raft of issues ranging from the logistical requirements and administrative overhead to the financial impact and legal consequences. 

Another issue relates to the exit strategy. The astute investor forms some idea in advance how long they plan to hold the property, and how they expect to dispose of it in due course.

The hassle of dealing with real estate in general, and foreign properties in particular, should be enough to put off many an investor. On the other hand, there’s no denying that real estate has been the dominant form of wealth across the planet. Moreover, the opportunities for investment in faraway lands often outshine the prospects in nearby locales.

Given this backdrop, a growing throng of investors has opted to venture into the property market on foreign shores. If an intrepid soul is unfazed by the challenges in store, then the rigors of investing in real estate in a global marketplace can bring ample rewards of its own.