Why Invest in Real Estate?
1. Tangible Asset: See it, Feel it, Investments
One of the most significant advantages of real estate investing is having a highly tangible asset. Real estate is a brick and mortar investment, and its value is something you can see, touch, and smell. Other investments, such as stocks and mutual funds, are paper assets and the value of these investments do not rely on the physical and tangible characteristics of that asset. The value of paper assets are primarily influenced by forces outside of your control, whereas you can change the tangible characteristics of your real estate investment in order to have a direct influence on its value (i.e. can create additional revenue streams and force capital appreciation). Moreover, with a real estate investment, there will always be value in the land, and the buildings – not to mention that insurance will protect your property. Unlike shares in a company whose value can be affected if a company encounters troubles (financially or with its reputation), with real estate, even if the worst happens, your property will never drop to zero value, and it’s an asset you can use and still hold on to for the long-term win.
2. Great Returns & Stability
As aforementioned, because real estate is less volatile than other investments and the value of the land or buildings will never fall to zero, this can lead to greater total returns and much more stable investment. Historically, real estate has proven to yield higher returns the longer you own the property, thereby minimizing your risk. As time passes, the value of the property will naturally rise as we deal with inflation, on top of any additional capital appreciation due to market conditions.
There are also a variety of methods to make money and grow your returns on real estate investments – including cash flow, mortgage pay-down, natural appreciation or appreciation through improvements, and tax advantages.
3. You Can Use Leverage!
Borrowing money to invest in property is a common tool used to build wealth. It is a frequent practice used to purchase your principle residence, so why not consider this practice to buy investment properties? When borrowing to invest in a property, lenders will usually lend up to 80% of the value of the property because it is considered a more secure investment. A bank or lender will not give you 80% of the value of a stock to invest in that market! Accessing greater leverage will allow you to benefit from the growth of a more substantial asset class, allowing you to earn those greater returns.
And leverage is not just about money – you can also leverage other people’s time! Real estate investment experts can help you invest by finding and analyzing cash flowing investment opportunities, overseeing and managing renovations, finding tenants, and managing your properties over the long term so that it can be a hands-off investment while you enjoy the return. You CAN be a real estate investor and landlord without doing the work!
4. You’re in Control
Having complete control over your investment is very powerful. With real estate, you can control entire value of the asset and the cash flow – something that’s impossible to do in the stock market! You can increase the value and/or the cash flow of the investment by renovating, increasing rents, decreasing expenses, developing larger properties, or subdividing an existing property to create multiple rental units.
The advantages of real estate investing include your choice of strategy based on your financial needs and goals. Property is a remarkably flexible investment, and an expert real estate investor can help you find the approach that suits you. What are your goals? Are you looking for properties where you can increase value, long-term capital growth, positive cash flow, or a combination of these? Different real estate strategies, such as Buy-Rent-Holds, Rent to Own, Flipping, Buy-Renovate-Rent-Refinance, each cater to a different need or goal. Not only can you choose how to grow wealth, but you can also mitigate risks, and plan several exit strategies so that you’re always in control of your money.
5. Create and Grow your Wealth
Real estate is the best way to grow your wealth to achieve financial security and financial freedom. Consider that people who own even just one property, like a personal residence, generally have more wealth than those who don’t own real estate. Real estate is the best way for the average person to create wealth.
Creating and building wealth gives you the opportunity to achieve not only financial freedom but also time freedom since it can also allow you to create the potential for passive income. Real estate investing can provide a consistent and steady income for retirement and will enable you to leave a legacy to your children and grandchildren.
Real estate can be part of a succession or inheritance plan, there are many ways to bequeath property, and the proper strategy could ensure your beneficiaries have a financial advantage.
Investing in real estate isn’t just for the wealthy, and you can have financial security and financial freedom even if you didn’t think it was possible.