These are a few reasons why you should look into real estate as an investment avenue.
1. Once you’re well established as a real estate investor, real estate tends to have a predictable cash flow.
Cash flow is the net spendable income derived from the investment after all operating expenses and mortgage payments have been made.
2. Real estate appreciates in value.
Since 1968, appreciation levels for real estate have been 6 percent per year, including during the downturn in the economy beginning in 2007, according to the National Association of Realtors.
3. Real estate can be leveraged.
A good thing about real estate in
investing is LEVERAGE! It is the use of borrowed capital to increase the potential return of an investment.
My belief is that ” the purpose of debt is to create wealth”. If the debt is not creating you wealth, you’re not using it adequately. In real estate transactions, leverage occurs when a mortgage is used to reduce the amount of investor capital required to purchase a property.
According to the National Association of Realtors, the annual return on a $200,000 property with a $20,000 net cash flow purchased with cash is 10 percent.
4. Real estate provides equity buildup
Most real estate is purchased with a small down payment with the balance of the money being provided through debt financing from a lender.
Over time, the principal amount of the mortgage is paid down, slowly at first, and then more rapidly toward the end of the amortization period. This principal reduction builds equity.
5. Real estate is improvable.
One of the most unique and attractive advantages of real estate is that it is improvable.
Because real estate is a tangible asset made of wood, brick, concrete, and glass you can improve the value of any property with some “elbow grease” and “sweat equity”.
Whether the repairs are structural or cosmetic, do it yourself or hire someone, the principle is the same. You can make your real estate worth more by improving it.
Disclaimer: The post is for informational and educational purposes only
Please consult your financial adviser for appropriate financial advice.
Caroline Clerisme, DMD