When done correctly, buying of land / real estate is one of the most popular and profitable investments with a lot of potential for success. Real estate investing offers many advantages, and investors can enjoy a steady income flow that may lead to financial freedom. I spoke with the industry experts and professionals who shared the various benefits of investing in real estate.
The following are the top 12 advantages of investing in real estate from the pros:
1. You Can Build Equity for the Future
One of the advantages of investing in real estate is being able to build equity. Equity is an asset that is part of your net worth. As you pay off your mortgage, you build equity. As you build equity, you now have leverage to acquire additional rental properties and increase your cash flow.
2. Owning Property Generates Wealth
Everyone should own at least one house or a piece of property. One of the many benefits of investing in real estate is being able to generate wealth through appreciation, building equity, and hedging against inflation. It can also provide cash flow with passive income from rental properties. These are the reasons why real estate should be a key component of your investment portfolio.
3. You Can Generate Passive Income
By investing in real estate, you can generate passive income that is nearly tax-free. Your rental properties will work for you even when you are sleeping. By buying several rental properties that generate enough income to cover your expenses, you have the freedom to do what you enjoy, instead of spending all of your time at work.
4. It Can Provide Cash Flow for Retirement
Real estate investing, when done right, is a stable way to increase wealth over a period of time. Among the many benefits of real estate investing is that it can provide cash flow for retirement. This means it can help supplement your retirement years with income from your rental properties.
5. Investing in Real Estate Benefits the Community
While most investors focus on the ROI, the CAP rate, the cash flow, and other financial indicators, a huge and unquantified benefit of real estate investing is the impact on the community. Responsible real estate investors improve the communities by improving available housing, maintaining properties, and increasing the local tax revenues. This directly impacts the communities and improves the lives of people living there. By buying and repairing a dilapidated home, one not only removes an eyesore but also improves the self-esteem of the residents living around the home. In a world where investors are associated with unchecked greed, the mom-and-pop real estate investors are a bright spot who change things for the better.
6. You Can Indulge Your Entrepreneurial Spirit
There are many ways to invest in real estate and become an entrepreneur. You can buy a home, fix it up and put it back on the market for a profit. Buy a property to hold and let the appreciation create wealth. Perhaps you become a landlord and start purchasing rental homes, multi-family homes, or even apartments. Maybe land development is for you. You are the boss.
7. You Can Enjoy the Portfolio Diversification Benefits of Owning a Physical Asset
Investing in real estate offers inflation protection as well as the portfolio diversification benefits of owning a physical asset. Real estate is a tangible asset that can always be monetized through renting or residing in the property, regardless of financial market conditions. This makes it far more resilient against asset market swings compared to traditional stocks or bonds. Real estate is part of the broader category of alternative investments, which include everything from art to collectibles and physical gold. The tangibility of real estate also affords property owners with a sense of stability during bear markets or short-term stock sell-offs.
8.Real Estate Can Be a Stable Investment with Ongoing Income
Unlike stock market investments, real estate investment does not wildly fluctuate on a daily basis. It is a stable investment that provides you with an income. You simply collect your ongoing income (known as Cash on Cash Return) on a periodic basis and hope to sell when the price appreciates substantially and the market is high. Of course, the market isn’t the same in every city, so opportunities to buy and sell can vary substantially across the state. Many people compare real estate investing to bond investing, because real estate provides stable cash flow for the owner. However, bonds are more sensitive to market fluctuations. Real estate properties won’t immediately change in price based on capital contributions or because of political volatility. This makes real estate a safe and stable investment. In many cases, real estate investments offer attractive tax benefits to the owners too.
9. Real Estate Is Easy to Finance & Provides Leverage
Real estate as an asset investment vehicle is easy to finance. You can borrow 50 percent to 90 percent of the acquisition cost at attractive rates, often rates below the anticipated annual investment return. The ability to magnify the investment return with financing is called positive leverage. Stocks, bonds, commodities, and art do not offer the same ease when being used as collateral for financing.
10. The Value of Real Estate Appreciates Well Over Time
Industrial real estate has been a very attractive investment for many individuals and institutional investors. Recently, the amount of capital chasing the ownership of industrial real estate has substantially increased. Values are increasing for two reasons. The first is that rental rates are continuing to rise because of the demand for these facilities and increasing construction costs. Secondly, with the number of investors bidding on industrial real estate investments, the cap rate, or yield, are continuing to compress, which is increasing values.
11. Real Estate Can Never Be Worth Nothing
Aside from the fact that most real estate values usually appreciate, your real estate investment can never go down to zero, even during a difficult time. GraceLand Homes & Property Ltd believes that you can always sell your property when you own one. Unlike a stock, real estate never becomes worth nothing, even if the value drops.
12. There’s a Potential for a High Rate of Return
One of the biggest benefits of investing in real estate is the potential for earning a high rate of return. According to GraceLand Realty Group, it’s possible to earn rental returns of 10 percent to 20 percent, depending on the location of your income-producing property. This is much better compared to bank accounts, bonds, and even dividend-paying stocks.
Real estate investing has many benefits and is a great source of passive income. Because there is a large demand for properties, the value of real estate usually appreciates, increasing your potential for profit. Aside from financial advantages, there are other important benefits of investing in real estate. Check the above advantages of real estate investing to know why this will make a great part of your portfolio.