As you plan to build your wealth or retirement funds, many professionals will suggest diversifying your portfolio. This way, you don’t keep all your money in one place, and you have an option to move funds around pretty easily. That includes investing in funds such as stocks and other bonds and, of course, real estate.
But is real estate a good investment? Most insiders in management firms (like those at Capitalist Exploits) say the answer is yes, and we’re going to discuss exactly why that is. We are going to take a look at the ins and outs associated with real estate so you can decide if it is where you want to put your money.
Is It A Good Investment? Reasons Why the Answer Is Yes!
Investing in real estate is a great option when it comes to getting the best return on your investment. There are several reasons why this is the case, and we’re going to take a look at each of them individually.
Here are some reasons why the answer is yes when it comes to answering the question, “is real estate a good investment.”
Leveraging
The fact that you can purchase something worth a certain amount of money for a reduced amount of cash means that you can leverage this investment at a higher rate than you would, say, stocks. This could mean that at the time that you are investing in your real estate, you only need to have 10% of its total worth. That will allow you to help with a nice return on your investment.
Appreciation
When you’re investing in assets like stocks and bonds, there is no way to make them appreciate faster. You have no control over that, but when you’re dealing with real estate, you can execute changes in the piece of property that will help appreciate the value. This means that, in essence, you can take a home that is worth $100,000 and, by doing some renovations and additions, increase it by 3 to 5% or even more.
Tax Breaks
There are plenty of laws in place that allow people who have invested in real estate to have tax write-offs when it comes to tax season. This includes things like writing off interest paid on the loan, maintenance expenses, as well as depreciation and several other factors. Are you able to increase your portfolio’s worth and reap some benefits that help you save money in the long run?
Cash Flow
Depending on the strategy you use, you may be able to ensure that your real estate investment heralds consistent cash flow into your pocket. For instance, if you’ve purchased a property and rent it out, you can utilize the rent to mitigate the mortgage fees and therefore make money while not spending any money, making this a wise investment.
Security
Taking your money and buying stocks can be a risky proposition. Even if you are the most astute financial manager in the world, you can’t control the market. Though real estate markets do ebb and flow for the long term, real estate is an appreciating asset that will help you feel more financially secure.
Versatility of Strategies
Unlike stocks and bonds, there are a lot more strategies when it comes to investing in real estate. You can choose to buy something and renovate it to flip it. Or you can buy wholesale or invest in a real statement investment trust. There are many different ways to utilize your money to invest in a real estate asset. This means you can choose the one that’s right for you and the least financially risky in your mind.
Generational Wealth
When you purchase real estate, it can be a long-term multi-generational investment. For those that are looking to be able to pass things down to their children, real estate is the best option. And in truth, it can continue to make money for generations to come if the right piece of property is chosen.
The Downside of Investing in Real Estate
Even though financial investors and managers look at portfolios, real estate is one of the best investments you can make to diversify your portfolio. However, there are still some risks that you should be aware of, so we thought we’d give you a look at some so that you can go into the process of investing in real estate with your eyes wide open.
Lack of Guarantee
Investing in anything is a risky proposition. There are never any guarantees that your property will appreciate in value or that you’ll end up making money from it. There are a lot of different factors that go into this, like the economy and the housing demand, and other issues. So when you invest in real estate, know that it is a good investment but it is not a guaranteed one.
Time and Energy
There are some strategies when it comes to investing in real estate that will lend themselves to be more time-consuming and have you expending more energy. If you’re a landlord because you’ve chosen to rent your property out, that comes with a whole different slew of responsibilities. On the other hand, if you’re looking to flip a home, then renovations can be time-consuming and exhausting, not to mention a little more costly.
Financing
Unlike stocks and bonds that you purchase with money out of your own pocket, many times when you’re looking to invest in real estate, there is some level of financing that must be garnered. This can be time-consuming and it can be pretty challenging to get the funding depending on your credit or your income stability.
Tips to Make the Right Choice for You
Now that we have a good idea of why real estate is a good investment and the potential challenges that could be present, let’s look at a couple of tips that we think could help you in your real estate purchasing process.
Cash is King
There are a lot of financial professionals that steer their investors away from borrowing money to invest in things. It’s much better and more lucrative to be able to pay with your own cash. Now, this might be challenging for some, and that is completely understandable because not everybody has $100,000 laying around, but if you can, it is better to do this as you won’t have to worry about mortgage payments and will be able to take in the revenue from rental or any sales without having to split the funds.
Plan It Out
Before you purchase any real estate, you need to make sure you understand all the costs of the process. That includes things like taxes, repairs, and even utilities. You need to understand these expenses and fees because that’s how you’re going to know how much you need to ask for from a financial institute or to gather in order to invest.
Research
Really understanding the market is key when it comes to choosing the real estate you want to invest your money in. This means you need to do research not only on the property but things like market values and compare those with multiple different neighborhoods. There are many ways you can do this by simply searching online and really diving deep into the statistics, or you can find an investment management firm that offers weekly insights like the ones from Capitalist Exploits.
Baby Steps
If you’re new to real estate investments, then it’s probably best if you start with a small property. Try just purchasing an apartment or a small office and then working your way through the process of that. Once you have that knowledge in your bank, then purchasing more real estate assets will be easier.
Tips On Finding A Good Piece of Real Estate to Invest In
Buying real estate as an investment opportunity is a fantastic choice, as we have already said. But there are always things you can consider and put into action to elevate the success of your investment. So if that is the case, we would like to give you a few tips on finding a good piece of real estate to invest in to save you time during the beginning steps of the process.
Here are several tips that we think could come in handy:
Right Price
In the end, real estate investments are all about growing your capital. You want whatever piece of property you choose to appreciate over time, which means you have to buy it at the right price to yield such a successful result. There are several ways you can access information to ensure you’re getting the best price for the property you’re looking to invest in.
Many mortgage insurers and lenders actually have information on these different locations to help you find a suitable investment. You can reach out to them and ask them for this information and then move on into your process. Also, make sure that you’re looking at different types of residential properties. Pay attention to upcoming developments in the neighborhood and surrounding areas that could potentially impact the value of that property.
Costs
Never forget that you have other costs that will come into play after you have purchased the property. Some of those will be during the actual purchasing process, and others will come after when you look to elevate the value of the home. These include things like taxes and fees and interest costs on the financing or all part of the costs that need to go into figuring out the value of your investment.
Hire Someone
If you want to relieve some of your stress, then once the process of purchasing the property is done, we highly suggest that you hire a reputable property manager. This can take some of the stress off your plate, like dealing with tenants and property issues that may crop up after tenants have moved in. Typically this service is a small percentage of the rent that is paid for the property.
Understand the Market
Understanding the market and all of the dynamics that go into that is vital from the very beginning. So like we said before, make sure you really research everything about the area that the piece of property is in as well as the surrounding areas. Reach out to real estate agents and other property professionals to get information on all the factors that could play a part in the value of the property you’re looking to invest in.
Type of Mortgage
When it comes to choosing a mortgage, there are a lot of different options. So if you want to select the right option for your financial security, you can choose between a fixed-rate loan or a variable rate loan, and each has its positive and negative attributes. Most of the time, you’ll find that variable rates are actually less expensive for the long haul, but fixed rates are easier to pay off in a shorter time frame.
Renovate
There’s always room for improvement. The chief idea of purchasing real estate as an investment is to have the property appreciated, and one of the best ways to do that is to renovate the home. So look into what people are looking for in the houses around the property. If your home lacks that aesthetic, begin looking at ways to build that into the home.
Final Thoughts
Information changes daily, but the fact that real estate is a good investment will never change. It may depend on the type of property or what your strategy is when it comes to the amount of financial stability you get from it, but it will always lead to a great addition to your portfolio.
You should always stay up-to-date on the information, and there are a lot of ways to do that. It can be through blogs or newsletters like Insider Newsletter, but you can rest assured that if you’ve chosen to invest in real estate, your portfolio will benefit from it.