Are you planning to establish a real estate business? It certainly is a wise choice keeping in mind the changing corporate environment. The real estate business is filled with benefits that everyone would love to enjoy. This business comes with a steady flow of income. You do not have to invest a lot of time and effort. It is all about your skills and how you deal with people. If you think you can deal with people easily and convince them to buy or sell a property, you can make the real estate business a steady source of income. Also, if your economy is facing inflation, you can enjoy higher profits. If not, then you don’t have to suffer from big losses.
In the real estate business, you make your own decisions and you have several tax benefits. There are many other benefits of property trading but it isn’t free from challenges. The majority of people are confused with the concept of real estate, property trading, and property investment. Keep reading this article to find out the difference between property trading and investment, and the challenges property trading faces.
PROPERTY INVESTMENT vs PROPERTY TRADING
Investment is a generally used term but what is the actual meaning of this in the real estate business? Property investment means you can own the property as long as you want to. The reasons for holding on to the property are different. For example, you want to earn rent by subletting it or you are waiting for the price of the land to increase. On the contrary, trading is an entirely different concept and it has not much to do with property investment. It isn’t just tax consequences that distinguish the two areas of real estate. Trading means you are buying and selling a property without holding it for a long time.
If you decide to sell a property for the sake of profits and don’t keep it under your name for long, you are a property trader. In simpler words, if you sell the house for cash in Nashville, you are trading the house.
You must be well-aware of the area you want to invest in. Being a trader and investor at the same time might not be good for you. The consequences are tough to deal with and the profit-seeking goal may not be achieved.
PROPERTY TRADING – THE CHALLENGES
You might have researched about the perks of property trading and the profit you can earn, but have you focused on the downsides? Before starting any business, it is better to know about the challenges as well. Every business has some good days and some bad days. If you know the bad ones, handling them wouldn’t be a huge problem. Here are the three most common challenges for property traders.
- CHANGING MARKET TRENDS
The market trends are never stable, especially in the property trading business. You have to keep yourself updated on the latest marketing trends so that you can trade smoothly. Trading, also called flipping, bears major ups and downs with the changing market.
Sometimes the demand for property is decreased but the supply is high. The traders face some major problems. On the other hand, supply might decrease and demand significantly rises, creating bigger challenges for the property traders. Bringing the market to equilibrium becomes a problem and setting the best price is another challenge.
Are you trading the right property? Not every property you find perfect for trade is perfect in real scenarios. The market may not be in favor of the location, or the structure of the property may not be appealing. If you have sound knowledge of the market trends, only then you trade wisely.
- POLITICAL ENVIRONMENT
Political instability is another challenge that you being the trader has to face. With political instability comes a high risk that decreases the buying and selling of property. Buyers are reluctant to invest because they are unaware of future political situations.
Nobody wants to trade for loss, neither you nor the buyer. Hence, if the political conditions are stable in your country, you are good to go. Otherwise, stop the trade for the time being.
- SWIFT FLIPPING SOUNDS EASY
Trading or flipping property sounds easy but it isn’t. Pure traders avoid investing in property renovation because that is a loss for them. Also, the intrinsic value of the property is easier to identify. If property traders start investing time and money on renovation and improvement, the intrinsic value is lost and they have to bear with the loss. Snowballing losses wait for the traders who fail to trade swiftly.
DO YOU WANT TO TRADE PROPERTY?
In a nutshell, property trading and investment are two different areas of real estate. You have to be on one side to save yourself from big obstacles. Property trading is a more preferable choice to make because its hassles are comparatively less. In property investment, you own the property for some time and it has a wide range of responsibilities and consequences. Property trading, on the other hand, is free from major obstacles. No matter which side you choose, be sure about the challenges you have to face. There isn’t a profit every time. You have to struggle and face challenges to earn better profits.