Owning real estate as a part of your investment portfolio offers a slew of benefits, including control over all of the decisions regarding that investment. Real estate can offer returns one of two ways: selling the property after a period of time and earning appreciation of the asset, or holding the property for lease and earning cash flows.
The unparalleled benefit of real estate is leverage. Leverage allows the investor to have a much higher rate of return on the investment than any money invested in stocks, bonds, or mutual funds. Consider the purchase of a property for $110,000 with a 20% down payment. In the first example, the investor waited until the property appreciated 5% and sold the asset. Appreciation is for the entire investment, and because you only consider the return on the money invested, that begets a rate of return of 25%. Alternatively, the investor could hold and lease the property. If the property was rented for $1,100/month, the rate of return would be 21.5%. These two rates of return if the investor paid cash for the entire investment (like a bond, stock, or mutual fund) would be 5% and 8.86% respectively.
Not bad in any market.
Experts agree that the combination of low property values, historically low interest rates, and availability of inventory have contributed to the best real estate investment environment in decades in the Phoenix area. Contact us today if you’re considering investing in real estate and expanding your investment portfolio. As Certified Investor Agent Specialists, we are experienced in working with investors and can answer any questions you may have!
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