Why Investing in Real Estate is a Great Idea

If you are interested in saving money and building long-term wealth, you have plenty of options:

• Savings Accounts
• Stocks
• Certificates of Deposits
• Bonds
• Mutual Funds
• Real Estate
• Commodities
• Annuities

Many people invest at least something in the stock market, especially if they have an employer sponsored retirement plan such as a 401(k). However most people today are investing in cryptocurrencies. While some have made enormous sums of money, only time will tell if these turn out to be great long term investments.

Real estate is another option for investors. Unlike cryptocurrencies, we know that real estate has a long term track record of making people very wealthy. Real estate has some advantages over the stock market, too.

Simply put, real estate is one of the best asset classes to invest your money in if you want to grow your wealth, not take excessive risk, and practically guarantee that in the long run you will end up wealthy.

Real Estate has Long Term Appreciation

Advocates for stock market investing like to point out that over a long enough time period, the market always increases. While that is indeed true for the market as a whole, individual stocks decline and sometimes never recover.

The real estate market may have its ups and downs also, and like the stock market it always recovers. But unlike individual stocks, individual properties rarely if ever lose value over the long term. If you buy a property today, ten years from now it is a virtual guarantee it will appreciate in value. Real estate is just about the only asset class that does that on an individual level. 

Real Estate Cash Flows

Real estate investments can provide a steady cash flow as well. Sure, some stocks can pay a dividend, but dividends can and do get slashed when a recession hits and profits decline.

Conversely, many real estate investments actually see an increase in cash flow during a recession. As homes become unaffordable, many would-be buyers are forced to rent for another year or two, which pushes up the rental market. Real estate is one of the best cash flowing investments available. 

You Can Control a Large Asset with Leverage

Most real estate investments are purchased through financing and using a loan. This means that the investor can control a large asset without spending much of their own money. Stocks can be bought on margin, but that comes with enormous risk. The margins can be called If the market bottoms, forcing investors to sell at the trough (low). If Real Estate values drop, an investor can wait it out if the mortgage payments are made. 

Real Estate Comes with Great Tax Benefits

Real estate investing comes with one other great benefit that no other asset class offers. Investors are allowed to take advantage of depreciation on their taxes as the property is actually appreciating.         

The cost of the property minus the land value is considered a capital expense which can be written off over a 27.5 year period. So while you are earning profit from the rental income, you also have to pay less taxes. No other investment has all of these benefits.

Real estate investing may not be for everyone. In order to be successful you will have to commit to learning, stay on top of expenses and maintenance, and probably learn to be a landlord. But the rewards are unlike anything else in the marketplace.