Real estate investing has been one of the most preferred sectors for investment for a long time. While a plethora of various other lucrative investment opportunities exist in the market, it’s hard to beat the reassurance that real estate investment offers.
Remember the stock market boom? While investing in stocks seemed like an easy way to increase wealth initially, soon the risks associated with them overpowered the wealth increment aspect. The stock market can never overcome the uncertainty factor associated with it.
Considering other investment options, safe investments such as the ones offered by banks frustrate customers with their low returns. Real estate is a relatively safe sector to invest in. While it does get impacted by changes in the stock market, the uncertainty factor is lower, which makes it a profitable investment option.
Here are seven points that prove that real estate investing is a smart choice for investors.
Maximize Your Tax Benefits
Real estate investors enjoy all kinds of benefits when it comes to taxes. Of course, the recent rule changes in the UK have decreased the profit margins for investors, but they are still able to avail lucrative tax benefits. For example, when they sell the property, they can actually roll their money by investing in property, and they have to pay either a minuscule amount of tax, or in many cases, no tax at all. Similarly, investing in real estate gives investors the chance to shield their wealth through mortgage deductions, showing depreciation on property, and more.
Enjoy Asset Value Appreciation
While on one side, inflation has reduced the purchasing power of the common people over the years, real estate has continued to offer exceptionally high appreciation for its value. Over time, real estate has surpassed most of the other investment options, provided investors look for long-term gains and not short-term wealth creation. Through efficient management of assets and gradual increase in the rent that comes from well-researched town and country lettings over time, the property’s net operating income is enhanced, thereby increasing the value of the property.
Protect Money from Inflation
Inflation has gripped almost every nation in the world. By investing your hard-earned money in real estate, you’re able to protect it from the effects of inflation, provided you refrain from investing in rental properties. Also, intelligent investing in income-generating properties of the market, such as the commercial properties, helps in growing your money as inflation grows.
Increased Cash Flow
Your cash, in most cases, when invested in real estate offers you higher returns in the long term than stocks or bonds. It allows positive cash flow along with the security of leases and mortgages of the asset. Through mortgages and releases, you may earn the value of your investment easily without having to sell them as in the case of stocks and other investment options. Real estate investments also offer an option for steady income-generation and wealth-building over time. It’s hard to get such kind of leverage from other investment options.
Pride of Possession
Irrespective of the economic scenario, real estate investment offers tremendous sense of pride of possessing property. Unlike the stock market, real estate does not rely on chance. It is an asset that comes with a great deal of pride of being able to own it. With a property as an asset, an investor has an option to generate cash either through rental or by selling, unlike other financial instruments where mostly, the only option is to sell them to generate returns. Not only is the property a continuous source of wealth generation, it also offers a sense of satisfaction through the touch and feel factor.
Allows to Multiply the Asset Value
In a scenario where the investor’s asset is placed in debt, he enjoys the option of buying more assets with less money as the debt placed is several times less than the original equity of the asset. For example, a property that generated a return of 6% and placed on a debt to the tune of 4% allows you earn 2% from the debt and 6% from the property, i.e. money was borrowed at a lower rate than the total cash flow generated. This helps the investor increase the asset value and grow equity over time as the loans are paid. This huge advantage doesn’t exist in other investment options.
Consistent Long-Term Results through Diversification
There’s no doubt that the real estate sector is complicated, but for the investors looking at long-term returns, it offers a steady income stream through investing in rental property and a considerably good return on investment. Leading financial adviser Patrick Connolly from Chase de Vere suggests that investors who look at real estate investment from a broader perspective are able to diversify their real estate portfolio with instruments such as investment funds, Real Estate Investment trusts, and individual shares in house builders. The diversification not only provides a broader exposure, but also reduces the risk factor and increases the probability of receiving profitable long-term returns.
From offering an indisputable advantage of owning tangible and physical assets to delivering profitable returns on investment over time (in most cases), real estate investing is the right investment option to grow your wealth. While socio-economic issues continue to affect the industry from time to time, real estate investments continue to be one of the smartest moves for wealth creation in the long term.