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Pros and Cons of Real Estate Investment Investment in Real Estate has many advantages such as a) Good rate of return- Historically has produced a high rate of return compared with other types of investment b) Hedge against inflation- As measured by the Consumer Price Index (CPI), real estate values have increased at a faster pace than inflation c) Leverage- To increase yield (return) on equity (investor capital) by using borrowed funds d) Equity buildup- As debt amortizes and property appreciates the investor's equity grows. On the down side, investors will face some disadvantages to invest in real estate as: a) Illiquidity- Properties can be exposed on the market for a reasonable period of time b) Need for expert help- There are many expenses associated with investing, including the need of property managers, financial consultants, and legal experts c) Management- Real Estate is a labor-intensive investment. Properties must be cared for, rents collected, and so forth d) Risk- Tenant turnover, increasing property taxes, and increased costs associated with operations are few examples of the type of risks to which a real estate investor is exposed.

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