Is Real Estate a Good Investment?

August 11, 2020by MeritAbode0

Real estate investing is as old a man himself. Over the years, real estate has proven to be an excellent investment. This investment unlike other forms of investment generate steady cash flow, an ongoing passive income, it appreciates, thus keeping up with inflation; it provides a higher return because of positive leverage and can serve as a form of long term investment. Generally, real estate serves as an overall strategy to build wealth creation.

Real estate is a self-sustaining asset, while stocks and bonds are a self-liquidating asset. The question is, would you prefer, a self-sustaining asset or a self-liquidating asset? The fact is that there are so many advantages associated with real estate. For one, it could help increase your net worth.

With the state of the economy today, it is advisable to choose an investment which has a higher chance of increasing in value. However, apart from all these, there are other reasons to affirm that real estate is a good investment. Below are five reasons why you should invest in real estate:

1. Better control over investment: When investing in real estate there is a guarantee that you have flexibility with your investment and you have the absolute control of your investment, unlike bonds and stock where you donā€™t have much control over the potential return on investment. If you want the value of your home to increase, you can choose to rehabilitate the home and then go ahead to put it in the market for a higher price. If you donā€™t want to renovate anything, you can still control how much more you intend to make by offering the property up to renters.

2. Cash Flow: The net spendable income derived from the investment, after all, operating expenses and mortgage payments have been made is the Cashflow. Real estate investment offers you with steady cash flow. For instance; investing in residential properties that produce rental income year-round can be a suitable means of getting you steady cash flow.

3. Itā€™s A Tangible Asset: Real estate is a tangible physical asset. When the market price fluctuates, the value of your property remains. Unlike stocks, having a tangible asset provides an avenue where you never loose value of your investment. On the upside, the ability of housing prices to fluctuate also creates the opportunity for the value of the house to increase. Even if the house only increases with the rate of inflation, you can get a bump in the price of the home that leads to more significant equity over time.

4. Inflation Hedge: In some economic situations, there tend to be inflations, and this inflation can affect the price of goods and services. The inflation hedging capability of real estate is gotten from the positive relationship between GDP growth and the demand for real estate. As economies expand, the need for real estate drives rents higher. This, in turn, translates into higher capital values. In other words, real estate tends to maintain the buying power of capital.

5. Portfolio Diversification: Real estate has a diversification potential; this is another amazing benefit of investing in real estate. Unlike other assets, real estate is a safer investment which records a steady increase over time. What this means, however, is that adding real estate to a portfolio of diversified assets can drastically reduce the volatility of a portfolio and generate high returns.

To the question is ā€œreal estate a good investmentā€ the answer is yes! Real estate investments are a distinct asset class which is easily understandable and enhances returns on investments.

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