5 Reasons To Consider Investing In Real Estate
By JD Esajian on January 3, 2018
Everybody wants to invest in real estate. Over the past decade there has been a sharp increase in real estate popularity and demand. There are literally dozens of shows dedicated to buying, selling or fixing up real estate. If you turn on the TV almost any night you can find a real estate show right up your alley. Additionally, you most likely know someone in your inner circle who wants to partner up on a deal and begin building a portfolio. There are also more options for financing and capital than at any time since the mortgage collapse. The bottom line is, if you want to start investing there is ample opportunity abound. There are a handful of ways to invest and numerous different ways to make a living. Here are five reasons to consider investing in real estate today.
- Stability. As we stated, there are many ways to make money investing in real estate. Most people see the house flipping shows on TV and think that is the only way to get started. While rehabs and flips are the most popular you also have the option of wholesaling, buy and hold rentals and real estate investment trusts. The common theme among any type of real estate is stability. When you compare real estate versus the stock market and certainly all bank accounts real estate proves to be much more stable. There is always a downside risk with any investment but traditionally over time real estate fluctuates less frequently. The market can, and will, go through corrections but over a 30-year period you pretty much know exactly what you are getting with real estate. On the flip side a stock can take dramatic swings daily, sometimes even during an individual trading session.
- Real asset. When you invest in say a stock all you are really getting is a piece of paper. That paper gives you the option of buying at a set price. From there you are at the mercy of the market and demand for the company or a product. While technically you are a shareholder in the company you do not have any say on the day to day operations. You are basically just along for the ride. With an investment in real estate you purchase a real, tangible asset that you can mold and shape any way you like. If you want to enhance the asset by making improvements as the owner there is nothing stopping you from doing so. You can make wholesale changes, rent, add a garage and do just about anything you like with your asset. Instead of just being along for the ride you control what happens with the property. There are still outside factors that affect the value and the market but you have the ability to adapt to whatever comes your way.
- Appreciation potential. With any investment the idea is to buy low and sell high. This isn’t exactly breaking news but must recognized. With an investment in real estate you have tremendous upside potential. There are always exceptions to the rule, but generally speaking most real estate appreciates in value. It may take a few weeks with the right work and the right market or it could take years. If you own a rental property you have the benefit of your tenants paying down your loan balance all the while gaining equity. At the end of your term, or sooner with extra payments, you will have an asset that you own free and clear without having to make payments. Your tenants essentially provided you with an asset with limited overhead and built in appreciation. With your appreciation you can cash out and purchase other real estate or simply reap the benefits of years of hard work. Either way with an investment in real estate the potential is there for tremendous appreciation.
- Tax benefits. One of the most underrated aspects of real estate investing are the tax benefits. Most novice rental property owners only look at the monthly cash flow bottom line when judging their asset. While cash flow is certainly important it is not the defining factor. It is possible to have a small net bottom line or even break-even but still have a profitable property. There are numerous tax benefits that can help off set your monthly numbers. Uncle Sam allows rental property owners to write off interest payments, depreciation, improvements and a bevy of other items. Instead of owing the government at the end of the year when the write offs are calculated you may actually get a sizable refund.
- Financing. When you purchase a piece of real estate you don’t need the total amount in capital. Unlike when buying stock or almost any other asset you can finance your investment in real estate. With just 20-25% down payment you can own 100% of the asset. If the property appreciates in value or you sell for a profit you reap the benefits, minus the principal owed. This type of leverage allows you continue building a portfolio without needing all the capital investment up front.
Most of the wealthiest people in the world have amassed their fortune in part through real estate. It is not hyperbole to say that real estate is one of the best investments you will ever make.