Real Estate as an Investment
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.
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.
Investment Life Cycle
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 its timing to determine whether it is worth the cost.