Even if there is uncertainty in the market or economy as a whole, choosing to invest in real estate can be a great decision. Real estate provides a number of benefits not received through other investments.
Returns Are Better than Stock Market
The stock market can be very volatile and the risk never really changes, no matter when you are investing. In real estate, however, the risk of loss is usually minimized when you hold onto your property for longer. If the real estate market crashes, once it improves the value of the home improves.
Tangible Asset Value
With real estate, there is a tangible asset value. Investing in the stock market can result in the price of your stock zeroing out, while a car’s value will certainly decrease over time. It is different with real estate. Once you invest in a home, a home insurance policy will help protect the asset and keep it’s value. This is not something other types of investments have. Depending on the type of real estate you buy and how it was acquired, it can start to make money immediately.
Values Will Increase over Time
The housing market has recovered from “bubbles” in the past and history shows that if you hold onto your home, it will increase in value. Property prices tend to adjust with inflation. If you are using the property as a rental, then when inflation rises, rent charged to a tenant can rise as well. Stocks don’t tend to move the same ways as inflation.
Help Diversify Your Portfolio
Diversification is important with investments as a way to minimize risk. Real estate serves as another investment asset to add to your portfolio. Since there is a lower risk of loss in real estate, it is a wise investment to make to achieve long-term financial goals.
Tax Benefits and Additional Income
Even with the recent changes to tax laws, there are still tax benefits that come with owning real estate. There is also cash flow that is associated with investment properties. Investors can use the property as rental income and get additional tax benefits on insurance and rental repairs. As you begin to receive rental income, that money contributes to achieving a positive ROI.
More Control over Assets
By investing in real estate, you have more control over your asset than other investments. If you are using it as rental property, you get to decide on your tenants, how much you charge for rent, and when to buy and sell. Having more control over these assets is one of the reasons why real estate investing is less risky. If there is a downturn in the economy, real estate is much easier to hang onto in order to regain value.
Investment You Can Use
If things take a turn for the worse in the economy, you can use the property for your own purposes instead of renting it out. When the economy recovers, you can move back out and keep your investment working for you.
Doesn’t Require a Huge Time Commitment
If investors don’t want to make investing a full time job, they don’t have to. There are some investors that want to buy property, fix it up and flip it, in order to sell it and make more money. For those who don’t want to do that, all one has to do is find a turn-key property and a tenant right away to start making money.
Easier to Understand and Research
Stocks take a lot of research and a lot of education, in order to understand what the best options are. It’s a very complex world and there are people that work full time in order to understand the system. Real estate investing is a lot easier to understand and to research. Research can be done online for properties and there doesn’t need to be a lot of specialized knowledge.
Los Angeles Real Estate Investor, Nicki Zvik explains, “Real estate is something that you can see and touch. It has inherent value because everybody needs a place to live and everybody already pays for a place to live. Hedge funds have the luxury of hiring rooms full of quants that can analyze stocks, bonds, or the broader market and make predictions of where it’ll go.
It’s obviously difficult for any individual to compete with that so already we have a disadvantage. With real estate, there is a much more level playing field because you can’t write an algorithm on each specific unique property.”
Getting started in real estate investing isn’t as difficult as it sounds, and there is a low barrier of entry than other types of investments. When investing in real estate, there are a few things to keep in mind. Many experts think that you should pay for investments in cash instead of borrowing money from a lender. If not paying in cash, it’s necessary to be able to comfortably afford the mortgage without relying on renters.
It’s possible that there will be a time where you are between renters, since the rental market can have high turnover. You don’t want the investment to be a financial burden instead of helping you build wealth. It’s necessary to plan out expenses, which include utilities, upkeep and repairs, and make sure that the investment property continues to be an asset.
Make sure you research the property carefully, so you know what to expect from local market conditions. This is especially true if you plan on selling the property later. When it comes to real estate investments, start small. For example, some will choose to start with a duplex or a house with a separate living area, in order to gain some rental income while they begin the journey of investing.