Why Real Estate Is a Good Investment

Why Real Estate Is a Good Investment

Real estate provides predictable cash flow, increases in value and keeps pace with inflation, offers high returns and positive leverage, and provides equity growth and deleveraging. Cash flow is the net result of a real estate investment before mortgage payments and operating expenses are incurred. Since most real estate investments are residential real estate purchased as investments, some cannot generate positive cash flow for a while. Sources: 2, 3, 9

Financing real estate investments at extremely low-interest rates to increase your monthly cash flow and profit margin. In theory, financing a real estate investment at extremely low-interest rates can increase monthly cash flow and profit margins. Sources: 1

Real estate is a great investment if you have more options than other forms of investment. When buying a new home, there is a chance that the property will be an investment because it will increase in value and build up equity. The chance for higher and more consistent returns on real estate than other investments. Sources: 0, 8

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Several advantages make real estate a good investment for individuals, including creating passive income, wealth, tax advantage, and building equity. Real estate investments offer competitive returns on equities and bonds. It is also the best investment for those looking to diversify their portfolio and generate extra income. Sources: 11

While most people tend to assume that real estate investments relate to buying rental properties to generate long-term cash flow and appreciation in value, there are other ways to make money from real estate investments than by becoming a landlord. If you want to invest in real estate but are not ready to leap to own and manage real estate, consider a Real Estate Investment Trust (REIT). Key Takeaways Real estate investors can earn money from rental income, appreciation in value, or profitable business activities depending on the property. Sources: 2, 11

Before you throw in your hat in the real estate game, you must have enough money for a deposit of at least 20% of the purchase price, closing costs, and initial repairs and upgrades to the investment property. Selling an investment property costs time and money and makes it one of the least liquid investments. The cost of investing in residential property decreases by 27.5% per year. Sources: 1, 6

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It would require $700,000 in investment capital to amass $2.8 million in real estate assets. Value-added properties are considered a sweet spot for investment properties because they represent a balanced mix of risk and return. Real estate investments take a different approach from those investors who rely on the stock market for their retirement savings. Sources: 7, 9

By choosing an asset that provides investors with predictable cash flows, excellent returns, tax benefits, and diversification, it is possible to use real estate to build wealth. One thing that distinguishes real estate from other forms of investment is that you can use other people’s money (OPM) to buy it. Another advantage of real estate investments is that many can generate monthly cash flows and build up equity. Sources: 1, 2

Investing in a risky asset class, such as real estate, requires diversification to achieve high returns over the long term because you never know when a particular property strategy or type will fall out of favor. Another advantage of real estate index funds is that they consist of many real estate investment trusts (REITs) that diversify across many real estate assets. Diversification through crowdfunding is also easier than traditional property investments because of the low minimum investment per deal. Sources: 3, 4

One of the advantages of investing in a portfolio is overall stability. A final advantage of real estate investments is that they are easy to understand and use. Sources: 4, 9

Residential investment is one of the financial cornerstones of the middle class, which can reap the rewards with minimal upfront investment. As Wall Street becomes more and more a mystery and a game for financiers, real estate investments are looking better and better for average Americans. Real estate investments are easy to acquire, and easier to finance, and there are no insurmountable financial barriers to entry. Sources: 6, 9

As your real estate investment experience grows and your level of comfort increases, your portfolio of higher-income properties becomes easier and simpler. In fact, there are so many benefits associated with real estate that if you learn the art of investing in good real estate you will increase your wealth. If you feel more comfortable investing in property and managing it, you may want to buy larger properties to increase your income potential. Sources: 6, 7, 11

Investing in real estate requires time, flexibility, and ambition to make it work. Real estate is a great investment if you take the time to learn about the process and the best ways to get high returns. Sources: 5

It is a great investment because it is accessible to people who want to get involved in their real estate investments on a physical level. When you start investing in real estate, it’s tempting to cut corners and try to manage your rental property yourself. While most people are interested in buying a rental property, real estate as an investment is never that. Sources: 5, 7, 10

There is a short-term property investment strategy, but it can be difficult for new investors to implement. Despite all the challenges you may have heard or read about, a minority of professional property investors are outperforming the average returns of the property market over the long term. Sources: 1, 3

A good local property management team makes it easy for property investors from afar to own rental properties in markets where prices are low and potential returns are high. If you are not an accredited investor in Fundraise, you can start with $500 worth of real estate investments. This strategy is a way to invest in real estate without having to buy and manage a home.

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