Real estate investment is simply buying property that presents potential future income streams. Since people will always need shelter, real estate has become the safest form of investment due to the assured demand available.
5 key reasons to invest in Real Estate
Here are the top reasons for making real estate an attractive investment option,
- Generates a stable income return
The number one reason to consider real estate investment is its ability to create a stream of income from the monthly rent that tenants pay. Not only does it produce positive cash flow each month but also helps in building equity. This is when you make mortgage payments with the proceeds from the tenants’ rent; you are simply making others pay for your investment. This calculator will help you find more information about equity.
- Leverage
This is means that you can pay for something without having to complete the full payments immediately. Real estate investment makes it possible to utilize the advantage by taking a mortgage to purchase a property and paying a fraction of the full cost.
The benefit of this is that, you are entitled to all the benefits of owning that property, get to keep the income and enjoy the equity build up. It is not common to find such benefits in other forms of investments.
- Has a low entry barrier
Becoming a real estate investor is not difficult and one does not need a lot of capital to start. There are a lot of financing options accessible. Being aware and having a clear understanding of the financing options is important in order to make the most of your property investments.
The success of many real estate investors usually depends on their ability to take advantage of the available financing opportunities such as mortgages, non-recourse loans or even personal loans.
- Great diversification opportunity
This diversification potential is another advantage of property investment. This is because it has a low correlation with other asset classes. The fundamental aspect of reducing investment risk is asset class diversification, which simply refers to the act of avoiding risking everything on one endeavour.
The addition of real estate investment to your portfolio helps to lower the volatility of the other high-risk assets hence minimizing the overall risk and providing a higher return per unit of risk.
- Appreciation
The positive relationship that exists between the growth of GDP and demand for houses creates an appreciation capability of real estate investments. As the economy of the country grows, the demand and house prices escalate which in turn means high capital value.
This makes the real estate able to maintain the purchasing power of capital and pass the pressure on to tenants. Over time, the value of property investments also increases at a similar rate of inflation.
Conclusion
Property investment is flexible enough to fit into nearly every investor’s portfolio but it requires extra effort and gaining the relevant information on the best options. For anyone interested in building wealth in the long term, it is clear that real estate is the best way to accomplish that goal.