Investors need to make sound decisions with their money. You want to ensure that your money grows over time, and that you’re able to earn interest on your capital. You want to build a nest egg for the future, while also being able to support yourself and your family right now. While there are plenty of different investment options out there, from IRAs to the stock market, there are some pretty compelling reasons that investing in real estate directly or in a real estate fund could be the smartest one available to you. What are those reasons? Let’s take a closer look.
- Protecting Your Money from Inflation
Inflation is something that just about every nation must contend with, and we’ve seen more of it in the past few years than most would like. By investing in real estate, you’re able to protect your wealth from the ravages of inflation, particularly if the real estate is income generating. That doesn’t mean you have to invest in rental properties, though.
Investing in a real estate fund allows you to buy into income generating properties without the hassles involved with traditional property ownership, and still protect your wealth from the dangers inherent with governments printing more money in a misguided attempt to kick start their economies. To put it another way, by investing in commercial or multifamily properties, you’re able to see the value of your investment increase as inflation also grows.
- Pride of Place
Sure, there’s some pride associated with making a sound investment decision in stocks. However, the stock market is largely about chance – it’s a roll of the dice. Investing in real estate, on the other hand, is not a gamble, and it comes with a great deal of pride when you find the right property at the right price at the right time. Not only are you able to make a smart, informed decision with your wealth, but you’re able to own multiple housing units in a day when many people cannot afford to even own their own home. Of course, there’s also the pride that comes from being able to offer those people a place to live and raise their families.
There are all kinds of tax benefits available for real estate investors. For instance, when you sell your property, you can actually roll your money into another similar instrument, and you won’t have to pay taxes at all. You can also shield your wealth through deductions for the interest on mortgages, as well as depreciation and more.
- Physical Assets Have Inherent Value
Stocks, bonds, and other investment vehicles have value, but it’s of a limited nature. Physical assets like real estate, on the other hand, have inherent value that goes far beyond what you’ll find with stocks. The structure has value, as does the land on which it sits. Not only that, but both will have value to you (the initial investor), as well as to future investors. There’s also the reality that the land and structure will be worth more to future investors than to you, allowing you to maximize the value of your investment and earn more than what was paid in the beginning when you sell. Furthermore, there’s the fact that an income producing property doesn’t rise and fall like the stock market – it’s stable over time.
- Higher Cash Flow
When you invest in a stock or bond, you earn a small return. However, when you invest in the right type of real estate, you’re able to see positive cash flow that outstrips other options by a considerable amount. That’s because you earn money monthly (to the tune of a much higher percentage than the paltry 4% annual return on your stocks). Commercial properties are secured by mortgages and leases, which gives you a reliable, high income stream that you can use to live on without having to sell your real estate to realize the value of your investment the way you would with a stock or a similar investment option.
- Leveraging Debt
With real estate investing, there’s the ability to leverage debt. This doesn’t exist with other investment options, and allows you to increase the amount of cash earned from your property by borrowing money at a lower rate than the cash flow created. For example, if a property generated a return of 6%, and a debt were placed on it to the tune of 4%, you’d earn 6% from the property and 2% from the debt (8% rather than the previous 6% when everything is said and done).
- Positive Cash Flow
Today, it seems like finding an investment vehicle that offers a decent positive return is downright impossible. However, that’s not the case with real estate. With the right property and investment type, you can see between 8 and 12% annual returns with payments made to you every single month. The trick is finding the right type of real estate fund. Conventional property ownership isn’t the way to do this. You’ll need to invest in a real estate fund that allows you to buy into commercial properties that would otherwise be inaccessible to private investors
- The Prospect of Appreciation
Real estate, unlike stocks, bonds and other investment vehicles, appreciates over time to a significant degree. Yes, the same can be said for other investment options to a lesser extent, but only real estate has the power to appreciate significantly beyond your initial buy-in point. The better the property is managed and maintained, and the more upgrades it receives, the faster and higher it will appreciate as well. This allows you to truly make the most of your money.
As you can see, there are some very compelling reasons that real estate investing is actually the smartest move available to you. From providing investments backed up by something physical and tangible to ensuring that your investment grows and offers a significant return over time, real estate investing is the way forward.
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