First-time investors tend to have a lot of questions when it comes to the type of investment vehicle to put their money and time in. This is because, for most investment options, the potential gains are always promising but the risks of loss are terrifying. Is there a safe investment option—that offers promising returns and low risks? Could real estate be one of them?
Well, according to billionaire Andrew Carnegie, who once stated that 90% of millionaires created their wealth by investing in real estate, the answer is a resounding yes. Here is why:
Table of Contents
Real Estate market is relatively stable
When compared to the stock market, real estate is considerably stable. The stock market is always known to be very volatile, which implies that you can either make or lose a lot of money within a very short time. Although the real estate industry is also subject to some level of volatility, it is less than the stock market. This means that there is less risk associated with investing in real estate hence safe.
When seeing the potential of an investment property, it’s crucial to conduct market research. This way, you can acquire potentially high-demand real estate properties. Aside from local properties, you might want to invest in properties abroad to expand your wealth.
It involves investing in tangible assets
Like gold and precious metals, real estate properties are tangible. It means that you can possess these assets. On the other hand, stocks, mutual funds, and insurances are intangible, or they don’t correspond to a physical asset.
When you invest in real estate, you are essentially investing in a tangible asset—a physical property. While any market can collapse, you will always have something physical if you opt for real estate investment. For instance, if you cannot find tenants for your rental property or if the rent in your area is too low that it doesn’t make economic sense to rent a property, you can turn the property into a home or sell it at a profit.
Provides regular income
Some people believe that you can only profit from real estate in the long term. Well, this is not always the case. Many investors buy properties to profit in the short term— positive cash flow. Irrespective of your property size, it will generate some rental income for you, especially if you decide to rent it out. And as David Lindahl puts it, any smart real estate investor will only go for a property that can provide more rental income than its recurrent costs. In this sense, real estate remains a safe investment option both in the short and long term.
The value Real estate will always appreciate
Since time immemorial, the housing market has always recovered from the economic bubbles that might have caused home appreciation to slip. This means that if you can hold on your real estate investment during uncertain times, prices will return to normal and the appreciation trend will always bounce back—another reason why investing in real estate makes a lot of sense for people who are looking for safer investment options.
It comes with a lot of tax benefits
There are a lot of tax deductions that you can get if you decide to invest in real estate, including cash flows from your property, mortgage interests, insurance depreciation, property taxes, and operations costs and expenses among others. This is why the end of the year is always busy for realtors—people want to take advantage of the many tax benefits before the end of the year.
Hedge against inflation
Real estate investing is known to be an excellent hedge against inflation. Although the price of most items will go up over time, the prices of most real estate properties tend to go up more rapidly. In other words, the appreciation of real estate properties tends to overcome inflation. Investing in real estate is, therefore, the safest way of ensuring that your money doesn’t lose its value to inflation.
It is easy to diversify your investment portfolio
You can easily diversify your investment portfolio if you decide to invest in real estate. For instance, you can invest in different locations, buy different types of properties, or choose real estate properties with varying levels of risks.
Key Takeaways
As you can see, investing in real estate is not only a safe investment option but also an investment vehicle that can provide years of happiness and priceless memories. And while real estate investment comes with certain risks like any other investment out there, you can always reduce your risks by diversifying your investment portfolio.
About Carson Derrow
