What is a real estate investment?
Real estate investment is buying a property to own and maintain and to rent out to
generate an income. The property can be a house, apartment, commercial space, or
even shopping center. Any brick and mortar is a real estate and can be transformed
into an investment property. The aim of the investment is to make more money from a
property than its expenses.
Investing in real estate is more than just owning, renting, or selling. It is also about
building value by upgrades, extensions, or inflation on the property.
Why invest in real estate?
Think about every building that stands, is being constructed, or being planned. All of
these add up to an enormous real estate market.
So what does this mean? A never-ending demand from two parties: individuals and
businesses. The housing demand and competition are eternal, people will always need
a home, a huge incentive for buying an investment property. So, is real estate a safe
investment? Yes! These demands alone can vouch for that.
Investor needs to place their money somewhere that offers them returns constantly,
which is where investing in real estate comes in.
Real estate is a good investment, but is it the right one?
Other than real estate, there are various ways to invest, such as stocks, gold, bonds,
etc. To decide what’s best depends on risk, required capital, and other factors. There
are several advantages that come with investing in real estate.
1) Risk: With real estate, you can manage risk more efficiently than with stocks. To
understand trends and patterns, you can look at how residential and commercial
property investments are performing and at their past performance. Stocks are more
difficult to understand.
However, to a certain degree, an investor can understand the influencers of a real
estate market more easily. For example, location and tenants can be analyzed before
investing and investors can pick the best options to ensure returns.
2) Taxes: There are benefits to having a rental property. The interest on the mortgage,
property taxes, insurance, and depreciation are all tax-deductible. The deductions
depend on rental income but expenses cannot be more than income, which is why it is
so important to have positive cash flow.
3) Required Capital: In real estate, there are strategies to make money without having
to actually spend money, such as wholesaling. Trading is another choice that comes
with real estate because the assets are tangible. Real estate is also one of the few
investments where, with little to no capital down, you can earn ownership.
Even though investments can be very liquid, real estate brings diversification to the
portfolio of an investor. The more diverse an investment, the less likely investor will get
lost if one type of investment doesn’t perform well.
So, is real estate a good investment?
Yes. Real estate is generally a great choice for investment. It can produce ongoing
passive income and can be a good long-term investment if the price increases over
time. You can even use it as a part of your overall strategy to begin building wealth.