The most common investing strategies shift in tandem with cultural and technological advancements. Nonetheless, real estate has been a reliable investment for more than 50 years. Building money through real estate is by far my favorite way to invest, as you have already heard me say numerous times if you regularly follow the site.
In America, real estate has only lost value twice, during the Great Depression and the Great Recession. It decreased by over half in some places, but it returned to its prior levels or even exceeded them in five years. Records indicate that residential real estate has grown by roughly 6% year outside of those two significant events. Other investments have more danger and less control, even though they might increase more.
So why make a real estate investment? Although I have multiple responses to this question, I will concentrate on eight in this blog. Let’s get started
1. Demand: Everybody Needs Housing
There is inherent demand in the real estate industry. Since everyone needs a place to live, rents either stay the same or gradually increase even during recessions. Since everyone needs a place to live, there is no need to persuade the broader public that they need your “product.” Because shelter is a basic need, you may occasionally advertise that you have an empty spot available, but this needs very little in the way of marketing funds.
There is inherent demand in the real estate industry. Since everyone needs a place to live, rents either stay the same or gradually increase even during recessions. Since everyone needs a place to live, there is no need to persuade the broader public that they need your “product.” Because shelter is a basic need, you may occasionally advertise that you have an empty spot available, but this needs very little in the way of marketing funds.
2. Leverage: Greater Assets at Lower Costs
Leverage is another compelling argument for real estate investing. You can move heavier objects than you could lift on your own by using a lever. The power of leverage in finance allows you to significantly improve the return on your investment. A small amount of money can give you power over a much bigger asset. One of the secrets to knowing how to create wealth is this. Leverage allows you to do more with less and increase your returns when you’re beginning from scratch to generate wealth through real estate.
This is a good illustration. Leverage in real estate allows you to buy a $100,000 property for $10,000. Your 10% return is on the $100,000 asset you purchase with your $10,000 investment, not on your down payment. This results in a $10,000 return, or a 100% cash-on-cash return. Those figures are hard to dispute!
3. Income and Cash Flow
Tenant rent is a source of revenue that can contribute to your real estate wealth accumulation. Tenants cover the mortgage on your house when you purchase and hold onto it. Rent is paid by someone else, even when the value of your asset rises annually. If you know how to manage it, cash flow is a significant benefit of real estate
4. Appreciation: The Value of Assets Rises
One of the main responses to the topic of why one should invest in real estate is appreciation. The gradual rise in the value of your property is known as appreciation. Real estate has the best track record for appreciation of any investment, but no investment can guarantee a profitable return.
5. Tax Advantages: Beneficial for Both Earned and Passive Income
The contribution of tax advantages to your total return on investment must always be taken into account when determining why to invest in real estate. Depreciation, which involves subtracting one-seventh of the property’s value—not including the land—is one of the tax advantages. Any gains or profits you made on the property are immediately offset by the loss of depreciation. Any interest you pay on the loan can also be written off.
6. Control: You Make the Choice
The degree of control I have over my investments is another reason I make real estate investments. For example, you have no power over the stock market. But when it comes to real estate, you may purchase, sell, and refinance at any time.
You make money in real estate when you acquire, not when you sell. You immediately realize equity when you purchase something below market value. Following that, you make the decision to refinance for a reduced mortgage rate or to boost value through upgrades. You have complete control.
7. Insurance: Safeguarding Your Resources
The capacity to safeguard your investments is another fantastic aspect of real estate investing. You can actually get insurance for your assets! Insurance provides a buffer against lawsuits, losses, natural catastrophes, and other harms. It is merely an additional method of lowering risk and strengthening the security of your investment.
8. Innovative Finance: Utilize Other People’s Funds
One of the main obstacles preventing people from investing in real estate is a lack of funds. However, innovative funding techniques can allow you to begin sooner than you anticipate.
Bringing in a partner who will invest all of the money is one approach to accomplish this. They will cover the cost of any required rehabilitation as well as the down payment. The proceeds are then divided between you both. Wholesaling is an alternative. You transfer the property to another investor and receive a finder’s fee in lieu of dealing with a title firm.
Last but not least, you can lease a property from someone who is attempting to sell it. You decide on the lease payment with the understanding that you can begin making repairs as soon as you begin renting the property. After that, you have the opportunity to lease-option it to someone else or, in some situations, lease-option and flip it to another investor.
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