Real estate is by far the best form of investment in the world. It gives investors a way to earn higher than average returns as they expand on their investment portfolios. When invested appropriately, real estate is by far the highest-earning asset class a portfolio can have. Below are 8 reasons why you should consider real estate as an investing opportunity to grow your capital.
1. It is the Largest Investment You Can Make
Real Estate investing is safe and secure given the assets are visible. It is rare to see real estate investments losing their values and if that ever happens, it takes just a short period to bounce back. Unlike other fiat currencies like dollars, real estate doesn’t lose value based on annual inflation. On the contrary, it performs better while affected by inflation. If you are a smart investor, you can even set yourself up well in down markets by buying value-add assets as many did after the housing bubble burst in 2008.
2. There are Various Ways In Which You Could Invest in Real Estate
Given the growth of technology today, investing in real estate has never been made easier. The syndication groups introducing new and innovative ways to invest in all kinds of properties, such as multifamily apartments and the likes, you’ll have plenty of options to choose from in this investment class.
3. There are Several Ways this Asset Class Appreciates in Value
Real estate investment does not only appreciate nature with the market, the appreciation can be forced. Natural appreciation comes with time while the general market for real estate inflates. Forced appreciation on the other hand can be described as the revenue you would make should you decide to put money into your investment. For example, if your real estate investment is a house, just got the roof re-done or renovated some interiors? That raises your selling price, too. The reason for this is as you renovate, you can increase the rents and the increase in rents forces the value up. There are many things you can do to force the appreciation of your property and this can make real estate investing a real cash cow. You can survey different ways in which you can add value to your real estate investments.
4. Real Estate Investment Can Diversify Your Portfolio
Many people never invest, and the ones who do rarely venture from the stock market. Perhaps this goes without saying, but the most successful investor is always the most diversified, as well. It doesn’t matter if you are an accredited or non-accredited investor, you can still invest in this asset class. It’s no coincidence that those who diversify have the most chances of success long-term.
5. Fewer Taxes are Imposed on Real Estate Investors
Real estate investors develop public land and in reciprocity, the government really values such people. When it comes to taxes, the government is very reasonable and tries as much as possible to lower their taxes. This serves as an encouragement to the group to continue investing. Here are some of the tax reductions real estate investors could part with;
• Property tax deductions
• Travel costs associated with your investment
• Money used on repairs and maintenance
• Depreciation deduction/ amount for segregation study
• Legal and management services taxes
6. Easy Access to Loans
Banks and other financial institutions are really okay with issuing loans to real estate investors. As long as you have a reliable credit score, a consistent source of income, experience, or a qualified sponsor you can get a loan from any bank at a very reasonable interest rate. The title deed to the property also serves as collateral for your loan. An evaluation is done for what your title deed is worth and you are issued with a loan of similar worth. Depending on interest rates at the time of purchase, you may also have several options when choosing the length of your mortgage.
7. It is a Form of Generational Wealth
Real estate is a tangible investment that can be passed from one generation to the next generation. Most people love the fact that they can leave the properties in their will for their children and, in some cases, they avoid some taxes. When you invest in real estate and train your kids about wealth creation, you will have left a legacy of wealth for your future generations.
8. It Can Serve as a Source of Passive Income
Most people invest with the hope of earning passive income. In retrospect, most real estate investors prefer real estate with the aim of earning passive income. There are various ways in which you can turn a real estate investment into passive income while a property manager or sponsor does the heavy lifting. Whether you are the sole owner or you are a part of a syndication group, passive income is normally the goal of any true real estate investor.
9. Increase in Cash Flow
The basic benefit of real estate investing is its potential to generate income, especially over the long term as your mortgage is paid down. The income generated from your investment property will often be sufficient to offset your mortgage payment, taxes, condominium fees, and other expenses, while still providing you with increased monthly cash flow. Your cash flow will be strengthened over time as you pay down your mortgage and funds can then be used to supplement your retirement income.
10. It has the capacity to Hedge Inflation
The inflation hedging capability of real estate stems from the positive relationship between GDP growth and the demand for real estate. As economies expand, the demand for real estate drives rents higher and this, in turn, translates into higher capital values. Therefore, real estate tends to maintain the purchasing power of capital by passing some of the inflationary pressure on to tenants and by incorporating some of the inflationary pressure in the form of capital appreciation.
Real estate investing is one of the best-performing asset classes out there. Year after year, it yields some of the highest returns in any portfolio. Do it right, and you could end up retiring well before you ever considered it possible.