There are plenty of investment options out there. Some people prefer to put their money into stocks, especially when they know a company is going to come out with a big product line or it has proven strong over the course of its existence. Other people purchase gold and hold onto the precious metal until it reaches record highs. Others may invest in currency trading, works of art or even wine. The fact of the matter is there are dozens, if not hundreds of different ways to invest. However, no matter what the other options are, investing in real estate is one of the best methods available. What makes real estate such a good investment? Here are a few different reasons.
Ability to Purchase Real Estate Under Market Value
There are very few investments you can purchase under market value. Generally, the only way to do this is to purchase a physical object. Stocks are priced low due to a reason with the company. Buying the stocks at a low value is more of a bet than anything else. However, with real estate, you can purchase a property from foreclosures and quick sales. You can even use negotiation to reduce the price as well, and some locations will give discounts for cash payments. Outside of luck, most other investment opportunities require you to purchase it at face value.
With real estate, you can rent out your property and receive monthly payments. Now, you will need to maintain the property, but rental income gives you money coming in every single month. The only other form of investment that comes close to this is when companies pay dividends for owning stocks. This is usually paid quarterly (or even annually). The more properties you own, the higher your rental income. If you convert a property into an apartment building or can partition off a home into multiple units, you’ll increase the amount of money you bring in even further.
With most other forms of investments, there really isn’t anything you can personally do to increase value. You can’t manually increase the value of gold or make a painting more valuable. You’re not going to make a 100 year old bottle of wine cost more by anything you do personally. With stocks, unless you own the company and increase revenue or release a new product, there isn’t anything you can do with this either. Real estate is realistically the only investment method where you can increase the value of the property. Whether you own a single home or an apartment building, the money you put into the building to improve the property will boost the property value. Due to this, should you ever decide to sell the real estate, if you put in the necessary money you can see a nice profit off of what you put into it. This is why successful home flippers make a good living when they know how to spot a good value.
Return Without Fully Paying Off Property
When you invest in real estate, chances are you will not buy the entire property at once (especially when first starting off). While you may only pay off 20% of the property through a down payment, you receive 100% of the rental income. There is a good probability that your rental amount will actually be more than your mortgage payment. This means the tenants are paying off your mortgage and you’re making money at the same time. You may experience a 15 or 20% guaranteed return annually (as long as someone is renting out the property). There is really no other kind of investment that is going to give you this kind of return. Additionally, once the mortgage is paid off, the rate of return will increase to a higher level.
Much was made in the most recent election about one of the candidates not paying federal taxes. This is mostly due to tax benefits off of real estate purchases. While you likely won’t own enough real estate to completely negate your federal tax payments, you can typically deduct mortgage interest from your rental income, which can possibly give you profit tax-free.
Real estate is truly one of the better investment options out there. You’ll always own your investment, you have all sorts of potential with the real estate, and you can bring in monthly income. Few other investment opportunities out there provide you with this kind of financial benefit. So, whether you’ve been investing your money for decades or you are rather new to the entire idea of investing, now is the time to look into real estate.