Reasons Why Real Estate Investment Is a Great Investment – Getting Started
Owning a home is a dream shared by almost everyone.
Be it a high rise in Central New York or a house of white-picket variety in a more friendly state like Colorado.
The Question many are asking is if real estate investing is something they should look into.
But here is the thing:
In 2008, there was a housing bubble.
Housing prices peaked and the Case-Shiller home price index reported its largest price drop in its history.
The price decline led to a lot of bad news:
Plummeting home prices. Check.
Mounting foreclosures. Check.
The collapse of the U.S. Housing bubble burnt so many house owners as the valuations of their properties pummeled and many are still waiting for a correction to previous prices even in 2018.
The 2008 debacle has raised questions about how safe it is investing in Real estate.
But don’t fret:
This article will outline 9 reasons why real estate investing is still one of the most robust investment classes. Especially…
In the Long Term
1.Real Estate Investment provides safety
You ever heard of this phrase…
Safe as houses?
Yes. I know you have
There is a reason that phrase is popular.
Properties worldwide have increased at a rate comparable to global share market since 1926.
An average of…
11.4% per annum
Despite a succession of wars, unprecedented natural disasters, housing bubble crashes and crises.
House prices have relatively held their own and appreciated stably.
It’s done so with little volatility compared to other asset classes like stocks and commodities.
This makes it an all-round safe investment class.
Though, share prices have marginal higher capital growth, where real estate wins is the huge difference in risk.
Shares can swing in returns (loss) from 40% in a year to -40% in a week.
You don’t get anywhere near that sort of variation in properties.
Safe? Yes. Properties are hands down safer than any investment class.
2.It’s easy to get started in Real Estate Investing
You don’t need charts.
No formal education required.
You barely have to do any deep fundamental analysis.
How to get started?:
There are a lot of resources available for free or cheap to get started online.
You could also hit the pavement by visiting suburbs and auctions.
You don’t need to gather a lot of specialist knowledge to get started.
Basic common sense and elementary math will get you started.
It’s a tangible asset
Your property is just that – a property.
If things don’t work as you expect, you can always move in.
Move back out?
You can do that too and still leave your investment intact.
Good luck trying to use your share certificate or that bar of gold when things don’t pan out.
3.Cash Flow from properties is tax-free
Except for capital gains, which is taxed, cash flow from your property investment isn’t taxed.
Cashflow should be tax-free…
…because of deductions from mortgage interest and depreciation.
This puts more money in your pocket. The snowball effect of tax savings is a huge plus to investing in real estate.
4.Real Estate gets you more leverage
You will be hard-pressed to find an investment vehicle that gives you as much leverage as real estate.
Because you can make down payment and finance the bulk of purchasing the property through debt…
You can leverage your capital…
…which can give you a better return on investment.
If an investor wants to buy $1,00,000 worth of shares or a commodity asset, they usually need $1,000,000 in cash.
You can’t get started until you accumulate the cash.
Let’s look at real estate:
If you were looking to make the same monetary value investment in real estate…
You don’t need $1,000,000 in cash
You can buy a property worth that much with just $200,000 in cash and finance the other $800,000 through a loan.
This is made possible through conventional mortgage schemes.
With this you can grow your portfolio of real estate investment with 20% down on each property.
Here is the kicker:
From our example you can accumulate five $1,000,000 properties worth $5,000,000 in total if you had that $1,000,000 in cash.
You make a down payment of $200,000 on each property.
5.You get so much control over your investment
Unlike Shares and commodities, real estate affords you massive control.
How much control?:
You can directly influence the inherent value of your investment through renovations and cosmetic additions.
This can help increase the value of your investment.
Shares and commodities are hardly customizable and you mostly can’t influence their worth/value directly.
6.You can start earning money right away
Depending on the type of real estate investment and how it’s acquired, real estate investors can start earning cash flow immediately.
With a quality tenant in place, your first rent check can hit your bank account at the end of the first month.
But it’s just not about earning money now. Real estate investment is also a great vehicle for…
7.Making money in the long-term
Making money right away…
…rental properties also bring you money in the future.
First, you get paid rental income as long as you own the property.
The option of selling the property once it’s gained enough real estate appreciation is there for you.
These two Income channels acts as a double whammy of making money from your rental properties.
8.Little work is required to maintain income
Here is what you need to know about real estate investing:
Few asset classes matches its passivity when it comes to earning income and cashflow.
Very little work is required from an investor.
It’s the closest thing to the phrase…
‘make money while you sleep’
Granted you need quality tenants and investing in stable and attractive location.
That’s about how much work you need to do upfront to earn income on auto pilot.
Real estate properties are very attractive assets
Should you decide to cash in your chips, you should always have investors lining up to buy your properties from you.
They may not be as liquid as money in the bank but they come as close to what an hard asset can be.
Investors find real estate properties as attractive propositions and you won’t have problems finding one for your properties.
Home, Sweet Home
With all the pros mentioned above, you still need to put in some effort investing in real estate.
That shouldn’t deter you, though. Real estate investment is one of the best way to build wealth now and in the long term.
You have read about why you should be putting your money in real estates. Here is what you need to do next:
Leave a comment if you still have reservations and what those reservations are.