There are lots of reasons why you might want to invest in real estate. It might seem like a pipe dream and out of reach for “normal people.” Many think that they have to be a savvy investor with tons of money — but, with some common sense and research, it’s pretty accessible, even for beginners.
There are all kinds of reasons why you might want to invest in real estate — probably some you’ve never considered. Here are 5 that we found.
1.) Real estate appreciates in value.
Real estate tends to appreciate in value over time.
Not only will the building or home itself likely grow in value, but the actual land that it’s built on will also usually be worth more over the years. In some markets, it’s not uncommon for the land to be worth more than the house that stands on it — or for the land value to continue to rise even without a house on it.
2.) Real estate offers better returns than the stock market.
This is another way to lower some of your risk, especially if you’re investing lots of dollars in other opportunities. Most experts recommend diversifying your portfolio so you won’t lose everything in one fell swoop if the market where you’ve most heavily invested happens to go south. Real estate is an excellent place to park some of your money — a place much safer than many other investments.
Ever hear the term, “safe as houses”? There’s a reason people use it.
3.) You can predict the cash flow of real estate investments.
Most investments don’t allow you to predict the kind of cash flow you’ll receive. With real estate, on the other hand, if you know what a property is renting for and that you have a tenant, you’ll know what your cash flow will be. As long as you keep the property occupied, you can count on that money every month. Remember, though, to budget for routine maintenance and repairs, and factor that into your yearly expenses.
If you don’t want to deal with finding and managing tenants yourself, you can hire a management company or a property manager to do it for you.
4.) You can establish a passive income source.
Because you can predict cash flow, you can also figure out ways to maximize revenue or cut expenses in order to establish a passive income source that will last as long as you own the property.
Set the rent for your property at an appropriate price and raise it responsibly to cover inflation. Try and always perform preventative maintenance so catastrophes and emergencies don’t sneak up on you. Also, make sure you have the right insurance.
5.) You can take advantage of inflation hedging.
Although inflation affects every investment, real estate is an investment that is almost always in demand, so it typically maintains its monetary power. Normal inflation often makes it more expensive for companies to create products and services. They either have to raise their prices or accept lower profits. Real estate doesn’t have a strong correlation with stocks or corporate profitability, so it is a natural inflation hedge.