Real estate is one of the most common and popular investment options nowadays, for many reasons. It can generate high amounts of passive income on a consistent basis. Also a fantastic investment for the long term when one considers the appreciation factor in any purchase.
According to Forbes magazine. Real estate investment has been recorded as the number one method for creating millionaires in the United States. Anyone who is keen to building up their own wealth collection. Should consider making real estate part of their investment portfolio.
However, by no means should any form of real estate investing be considered “get rich quick”, or even worse… “get rich easy”. The truth is, that any form of investment, including real estate, requires investors to do their homework first. This involves research and dedication to managing their own portfolio.
Not to mention, that getting started in real estate is likely to cost you a considerable amount of money upfront. Purchasing a home, an apartment building, or land in most cases, will be expensive. That doesn’t include any of the bills or maintenance that you will have to incur too. Having said that, there are many benefits of real estate investment, including some of the following:
Is Real Estate a Good Investment in 2020: What makes real estate a good investment?
If you are looking to invest in real estate in 2020 with some extra cash you may have. It is crucial that you choose investments that have great track records of producing long term wealth.
Real estate prices plummeted in many US cities a number of years ago. It is therefore on an upward trend in many cities nowadays.
This does make today a perfect opportunity to buy. Since sales prices and interest rates are down and before they go back up in the coming years. There are numerous other reasons why real estate makes for a great investment, such as the following ones:
1.) More control
The main problem with most stock and bond investment opportunities nowadays is. They simply don’t offer the same kind of freedom and flexibility that can be found in real estate deals.
Real estate investing gives the investor plenty of leeway and flexibility concerning the deal. If you wanted to maximize returns that you are receiving from your rental property. You could renovate the property and sell it for full market value.
Alternatively, even if you had no plans of renovating the property. You could still have a large degree of influence over the profits by increasing the rental rates that you receive. Should you decide to rent the home out.
Also, in the event of a recession. Many people may make the decision to rent a house rather than purchase, in order to save money. Which means if you plan on utilizing the buy and hold strategy to produce long term wealth. You will be able to rent the house out and create a positive cash flow.
2.) Greater cash flow
When investing in stocks and bonds, you tie up most of your money until you can sell it. However, real estate investment offers you a great opportunity to generate a positive monthly cash flow.
One way is to rent the home to a tenant. Say for example, your mortgage payment was low. You could rent the home out as long as the rental rate is greater than the mortgage payment. This would allow the property to create a positive monthly cash flow. In some cases, the cash flow may be enough to pay for any unexpected expenses the property may incur.
Another great way to utilize your property’s cash flow is to reinvest the money into upgrading the property. Still giving you the opportunity to continually develop monthly positive cash flow.
3.) Tangible Asset
Unlike stocks, bonds, or paper investments. When you invest in real estate, you will own physical, tangible assets. When the housing market goes south. The paper value of the property may decrease.
At least you will know that the asset itself has not been eliminated. You can still use the property to generate a positive cash flow. This tangibility offers you the peace of mind in knowing that your home will never completely lose its true value. Which is an advantage that real estate has over stocks and bonds.
Furthermore, the fact that housing prices can fluctuate over time means. You can gain more equity in your investment as time passes by. Worst case scenario, if the value of the house only went up at the rate of inflation. The home would still gain a 3% increase in value. Which leads to more wealth over time.
If you decide to make a real estate investment. It is likely that you will want to purchase multiple properties in order to gain a larger ROI. Perhaps the most appealing feature of real estate is that it allows you to utilize the bank as leverage.
For example, normally the bank will only require a 10 – 20% down payment in order to finance an investment property. After you have purchased your investment property and the property value goes up. The equity in the house will also increase. While your initial investment remains the same.
Also once the equity in the home rises. You will have the opportunity to use that equity as collateral to purchase other investment properties utilizing the banks money. This makes it possible for investors to grow their real estate investing portfolios quickly using very little cash. Thus creating long term wealth.
5.) Tax Brakes
Most home owners will receive some form of mortgage deductions when they file their income taxes. Likewise real estate investors also get tax breaks.
One way is when they purchase a home for the sole purpose of renting it out. They can write off the cash they used when fixing it up.
Another tax break real estate investors utilize. Is claiming repair expenses when fixing and flipping the home as capital expenses. By claiming capital expenses, you can offset the profits you earned by paying less in taxes.
Conclusion: Is Real Estate a Good Investment for Retirement?
When considered from many perspectives, the question of “is real estate a good investment?” you should agree by now that it is.
The majority of other investments do not offer such leverage, tax incentives and tangibility as investing in real estate. Which makes it one of the most popular investment methods of 2020.
The South Texas Wholesaler
J.R. Medrano is a real estate investor who specializes in wholesaling inherited homes. He has been wholesaling real estate in the Corpus Christi, TX area for the past 5 years. If you would like some honest advise about wholesaling houses. Feel free to contact him at anytime.