Investing in Real Estate: Is It For You?
In my mind, and in my personal experience, there is no better investment than real estate! Here are just a few of the reasons:
- Control. When you purchase stocks, bonds, mutual funds, CDs, or your company 401K plan, you put money into it but you can't do anything tangible to affect the growth of that product. For example, you could pour tons of money into Coca Cola and then buy Coke products like crazy, but you would have little affect on the value of Coke and end up with diabetes! Put that same money into a house and you can affect the value of your investment by improving curb appeal, new paint and flooring, renovating the kitchen, etc. You can't control the overall housing market, but if you buy smart, you can weather any storms.
- Value. When you purchase a stock valued at $10 a share, you pay $10 a share. You can't find bargains where someone will sell you those shares for $8 each or even $3 each. With real estate you can create immediate equity and cash flow by purchasing below market. Let's say you find a 3bed/2bath home valued at $200,000 but the family is desperate to sell (pre-foreclosure, divorce, etc). You buy it at $160,000 and immediately create $40,000 in equity. Real Estate investors are always on the lookout for deals and can often gain 20% - 50% equity at closing!
- Leverage. You put down $30,000 on a home and gain control of a $150,000 asset. If you bought well below market, you can put down $30,000 and control a $200,000 asset. Then you gain the value added by a tenant every month when they make the mortgage payment for you!
- Taxes. You get to deduct mortgage interest payments, as well as operating expenses, property taxes, insurance and depreciation. How do the wealthy get away with paying so little in taxes? They write off major deductions like mortgage interest. Real estate enables you to build major wealth without a major tax impact.
- Inflation. Rental prices and home values tend to rise with inflation, which helps protect your value. Stocks and other investments can be very volatile, losing 10 - 15% in a matter of days. Real estate does fluctuate, but it tends to have minor fluctuations compared to other investments. But while property values may drop, rent rates will tend to hold steady so your tenant is still paying your mortgage! All you have to do is ride out the storm and the market will recover and then start growing again.
Want to learn more?
There are many more reasons why real estate can be a great investment. If you are interested in learning more, contact us today and we can help point you to some great resources that will educate you and give you the solid foundation you'll need going forward.