Pros and cons of investing in the real estate market

Investing in the real estate market has both advantages and disadvantages that should be carefully considered when buying, selling, or renting a property. Vardan Avagyan, an expert in the field and director of Cascade Realty real estate agency, answers questions about the pros and cons of real estate transactions.

Investing in the real estate market is often seen as a dependable long-term investment that can generate consistent income and increase in value over time. Allow me to list the main advantages associated with purchasing real estate.

Passive income: Renting out real estate can provide a passive income, particularly in areas with high demand for rental housing. Real estate in the heart of Yerevan, the capital city, is consistently in demand, with both tourists and diplomatic representatives renting apartments in this area. Moreover, due to being in demand, real estate in the central Yerevan has a higher value compared to other administrative districts of the capital.

Inflation protection: Unlike certain other assets, real estate often maintains its value and can even increase in value with inflation.

Life quality improvement: Purchasing your own home can enhance the quality of life by offering more stability and security.

Tax benefits: Property owners in Armenia can benefit from tax credits related to mortgage interest, repairs, and other expenses. For example, one benefit is the law allowing income tax refunds in case of purchasing real estate from the primary market.

Legacy: Real estate can be inherited, providing financial support for future generations. 

Acquiring real estate for investment purposes includes certain responsibilities and risks that must be carefully weighed before making a purchase. Let me list the main factors that can be viewed as negatives.

High initial expenses: Purchasing real estate requires a significant upfront investment, including a down payment, transaction fees, taxes, and additional expenses.

Maintenance and operational expenses: Property owners must consider the ongoing expenses such as maintenance, repairs, utilities, insurance, and furnishing.

Depreciation risk: Real estate values can decrease due to economic downturns, changes in supply and demand, geopolitical instability, and other factors.

Low liquidity: Real estate is not liquid. The sales process can be lengthy and require much effort.

Tenant risk: Rental properties carry the risk of having untrustworthy tenants who may delay payments or cause damage to the property.

Economic and legal risks: Changes in the economy, tax laws, land use and urban planning regulations can negatively impact the value and attractiveness of a property.

Geographic risks: Real estate values are heavily dependent on location. Economic changes or natural disasters can significantly affect prices in certain areas. It’s noteworthy that real estate in the center of Yerevan, due to its consistent demand, maintains its relevance and high value regardless of the situation.

What is your advice for the people willing to invest in Yerevan's real estate market?

The real estate market presents more and more diverse investment options daily, and offers great opportunities along with the inherent risks. Before purchasing a property, it's important to thoroughly analyse and weigh the pros and cons of the given investment. Ahead of any transaction, especially of high value properties, it’s better to deeply research the market and collaborate with specialists in the field such as real estate agents, lawyers, and financial advisors.

Expert analysis and assistance can reduce investment risks and optimise real estate transactions. We must note that Cascade Realty, the pioneering leader of the industry, offers high-quality advice on all real estate issues.