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Disadvantagess of Investing in Real Estate - Tax Perspectives

October 8th, 2008 · No Comments

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Liquidity is the ability to turn the investment back into cash in a relatively short period of time. Real Estate has a low level of liquidity. It may take months or longer to cash out and sell the property, where as stocks can be sold in a few days or even less time. Stocks have a high level of liquidity.
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Risk is the chance that things will not turn out as planned. Real estate has a large factor of calculated risk. It is a slow moving market and generally speaking, the longer time in the market, the less risk. Using a high level of leverage will also increase your financial risk. Business risk is also a concern if your property requires any management aspects.
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The investment life cycle has three steps - the purchase, operation and sale cycles. The key to a successful investment is to consider all of the income expected through each cycle and it’s timing to determine whether it is worth the cost.

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