Over the past few years, more and more people have decided to buy real estate, instead of classic fixed-term savings in the bank. Due to the stable and continuous price growth in the real estate market, except for the current situation due to the corona virus, many people consider buying a property a much better option. On the other hand, term savings in the bank gives a lower return on investment, but a significantly safer investment.
Each of these two things has its advantages and disadvantages, and it is very difficult to answer this question. Through the following text, we will introduce you to both forms of savings, and state the advantages and disadvantages of each. Make yourself comfortable and continue reading.
Buying real estate
Buying real estate is not only an investment, it gives you the physical value of the investment. This means that your money will not sit unused, but you can live in the property or rent it out and thus generate additional passive income. In addition, with real estate, you provide your family with security and a place to stay.
Advantages of buying real estate as a way of saving
Apart from the fact that real estate gives you a place to live, the advantages of buying real estate are numerous. If you do not intend to move into the property, it can be a great source of passive income. Whether you rent on a monthly or daily basis, the monthly income from renting can be several thousand kunas. Of course, this depends on the location, size and arrangement of the property.
If you are buying a “cottage” in a tourist location, then daily rental is very popular and can generate a much larger amount of money than monthly. Of course, this will also require greater intervention regarding cleaning and tidying up, as well as welcoming guests. Although the number of accommodation facilities on the coast is increasing from year to year, the number of tourists is growing accordingly, which leaves additional space for new renters.
Negative sides of buying real estate as a way of saving
Like any investment, buying real estate has its downsides. These are the costs of maintaining the property and paying for utilities. If you rent the property, and in order for it to be competitive on the market, it needs to be renovated in detail every few years. In addition, you have to take into account unpredictable costs that may arise in the event of people staying in it or due to external influences.
The costs of owning a property are:
- Costs for decoration or renovation
- Property insurance
- Unpredictable machine breakdowns in the property
- He directs
Costs are not the only “negative” side of buying real estate as a way of saving. As with any investment, there is risk. It is essential to carefully study the real estate market and think about what awaits us in the future. Although real estate is one of the most stable ways of investing, it is influenced by many factors.
Without proper information about how to invest in real estate and the movement of prices on the market, there is a possibility of buying real estate at the very top of the price, which will fall over the next few years, until the market stabilizes again and starts to grow.
Term savings
Term savings are today considered an old, traditional way of saving. It is the safest option for savings, but it does not provide a large return as is possible with the purchase of real estate or, for example, investing in shares. Of course, due to the lower risk, the investment return is also lower. Depending on the bank and the amount of money, the interest also depends, and the advantage of fixed-term savings is that the money can be immediately available to you, unlike the process required for selling real estate (finding a buyer, solving paperwork and selling).
The downside of term savings is inflation. Over the years, an increase in the flow of money occurs, and money loses its value. This is why saving in cash is not worth it at all, because you lose money that way, term savings roughly maintain the value you have, while investing in real estate can earn you extra.
What is better – term savings or buying real estate?
It is important to look at the situation from both sides and, based on the conclusion, make a decision about which way of saving is better. In the following, we present the advantages and disadvantages of both investments through notes:
Buying real estate advantages:
- Possibility of higher earnings
- Possibility of passive income through renting
- The possibility of using the property
Negative sides of the purchase:
- Costs
- Investment risk – the possibility of real estate prices falling on the market
Term savings advantages:
- Safe investment with minimal risk
- Availability of money when you need it
Negative sides of savings:
- It's a shame
- Savings without income – interest covers the decline in the value of money due to inflation
The choice is yours, and in case you decide to buy a property, be sure to check our offer. In addition to a wide range of offers, we offer you guidance through the entire purchase process and handling of paperwork, so that you get the property on a “turnkey” basis.
