Are The Investments In Yachts And Real Estate Are More Assets Than Liabilities?

When you have money, you are always looking to invest it in something, which is worth it. The modern situation with real estate in Ukraine shows positive changes and an impressive rise in this sphere. Thus, if you have $100,000 and are ready to invest, what should you choose – a luxury yacht or a property?

Asset vs liability

First of all, we need to answer the question ‘What are assets?’ This term denotes something, which can put money in your pocket. In other words, it helps earn. And what are liabilities then? It’s something that takes your money out of you. We can also say that liabilities are something you owe to other parties. For a healthy and successful business, assets should always outweigh liabilities.

In the traditional sense, we can say that the following things are considered to be assets:

• Cash
• Inventory
• Vehicles
• Investments
• Real estate, etc.

Thus, we can consider both yachts and properties to be assets. But is a boat an asset really? To find this out, we should look at the profit you can get and possible expenses connected with both issues. Think about buying a yacht. It will lead to the following:

• Decrease of its price (15% right after being lowered into the water and then approximately 10% each year)
• Expensive maintenance (for a yacht of 100k cost, you will have to pay about $10,000 per year to keep it in a proper condition, so no profit is presupposed here).

Thus, even with an opportunity to bring money by means of renting, you will have great expenses connected with it as well as the impossibility to sell it at the same price. On the opposite, real estate is more positive in this connection:

• It guarantees passive income
• With the growing prices for property, you will have a gross profit of around 15% every year
• Annual revenue before taxes for the property bought at $100,000 will comprise around $12,000 or more.

So, it’s unlikely to lose money even if you decide to sell your property because the prices tend to grow. The only thing is to make the right choice in terms of location and other characteristics of real estate. At the same time, the property also requires maintenance (especially if it’s a mortgaged one). It should be kept warm, clean, dry, and pretty. All of these demands money. And if you don’t take care of your property, it will lose in its price. However, real estate becomes a true asset if you manage to rent it for a good price and then the cost of utilities is passed on the shoulders of renters.

Benefits of the real estate investments

Real estate investments have always been beneficial due to the high demand. As we’ve mentioned, the right investment together with good maintenance and rent can bring many advantages to investors (compared to the yacht):

• Protection against inflation
• Regular earnings and cash flow
• Impact on the community (you can buy property, which is in demand and influence the issue of housing)
• Portfolio diversity (real estate can become something new for you to widen your business)
• Valuable tax benefits (they are offered in almost every country)
• The possibility to use it for your own purposes (including permanent and part-time residence).

To better understand the benefits of real estate investments, it’s also recommended to get familiar with the current situation in the property market. If we take the situation with Covid-19 into consideration, we can observe the great losses for many business spheres. However, the property market demonstrated a different tendency. While people’s lifestyles change, a new wave of demand for certain types of properties rises.

With the waves of lockdown (past and future) in many countries, people started searching for more space and organizing their homes in a definite way. Thus, country houses and houses with views on a park, for instance, became more popular. And, no matter what the view is, most detached homes added in the price on average.

If we consider the general situation with the prices in the property market, we can see that from 2016 to 2020, it wasn’t critically changing. There were only normal increases and periodic decreases from year to year, with the addition of several percent to the house value annually on average. With COVID-19, prices trends started growing significantly faster after chain sales disruption in spring 2020. A great rise happened in February-April 2021 (for about 20%) leading to the following growth with its peak in August. As a result, real estate investors got up to 35% percent annual return in Ukraine.

According to expert reports, the positive tendency will continue. In 2021 and the following year, certain types of property are promised to be beneficial for investors:

• Adaptive reuse property. There’re many hotels, shops, and other real estate types, which are unwanted. Now it’s possible to buy it at a moderate price and then reshape to let it for rent as some another object.
• Office property. Office sector revives. Even with the current situation, such property is good for investments in the future.
• Nonperforming mortgages. Many loans stay delinquent. For instance, in October 2020, in the US, over 4.5% of all loans are over 90 days delinquent. Banks tend to sell such properties at moderate prices to lower the burden.
• Rental property. There’re hundreds of landlords in depressed markets, who can’t find renters for their properties worldwide. At the same time, they still have to maintain their real estate. Due to this, many of them offer to buy property at a low price.

Thus, the real estate market is much more adequate as an investment than a boat.