Investing your money can be a great way to provide yourself with financial security, and when done right, it can make you a lot of money too.
Understandably, there is always risk associated with investing your money. But if you choose the right investment route, it is possible to minimize this risk. But why is real estate a good investment?
If you have ever watched the Property Brothers, or any home renovation show for that matter, then you will be familiar with investing in real estate.
It is a popular form of investment, and one that many people enter into every single year, and you might be wondering why people choose to invest in real estate.
In this guide, we’re looking at 8 reasons why real estate is a good investment. So if you want to find out more, keep on reading!
1. It Is A “Safe” Investment
First up, real estate investment is often considered to be a “safe” form of investment. There are lots of different types of investment routes that you could choose to go down, and out of them all, real estate will be one of the safest.
This is primarily because real estate investment comes with an asset, and that is the building itself.
While the housing market does fluctuate, and your property could lose value, it is rare for the property market to fluctuate as dramatically as fiat currencies (like the dollar). So your money is much safer when it is tied up in property.
While the value of your property could drop, it is rare for your investment to lose value. If it does, it is typically for a very short period of time as the property market tends to bounce back much quicker than currency.
2. It Diversifies Your Portfolio
Of course, real estate doesn’t have to be your only form of investment. If you are already investing in things such as the stock market or cryptocurrency, then you may choose to invest in real estate to diversify your portfolio.
A good investment portfolio will have money invested in multiple different routes. This makes your portfolio more secure because even if you lose money in one of your investments, you will have the other investments to provide security.
If the majority of your investments are in liquid assets, like stocks and shares or crypto, then investing in real estate will also allow you to invest your money in a fixed asset. So it can provide security and diversification to your portfolio.
3. It Provides Tax Benefits
Another great reason to invest in real estate is because you could be eligible for a lot of different tax benefits through tax deductions. If you live in the house that you have invested in, then you won’t be eligible for these.
But if you rent out your properties then you may be!
Technically, when you buy and own a property that you then rent out, you own a business, rather than just an investment. So, the IRS allows you to make the same tax deductions that you could if you owned a brick and mortar business.
These tax benefits may include things such as writing off any expenses that you have to pay for the maintenance of the property, and even things such as travel to the property that you own. So, investing in real estate could help you save money in your taxes.
4. It is a Tangible Asset
One of the biggest reasons why people invest in real estate is because it is a tangible asset. A lot of investment routes consist of investing in intangible assets, such as stocks or bonds, where all you have to show for your investment is a piece of paper.
Whereas, when you invest in real estate, you also have the building to show for your investment.
For many people, the security that this tangible asset provides is enough to lead them to invest in real estate. While the value of your investment may fluctuate, you will always have that asset, and that can make you feel very safe in your investment.
5. It Provides Passive Income
Passive income is something that a lot of people strive for, and real estate investment can provide you with this. There are lots of different ways to get passive income from your real estate investment, and it is possible to get this from the very start.
Many people who invest in real estate in the form of flipping houses do the work themselves. However, you do not need to do this. In fact, you don’t even need to be the project manager.
You can hire a project manager to do all the work for you, and they’ll look after the project while you receive passive income from the property.
6. It is Versatile
It is easy to assume that the only form of real estate investment is flipping houses, but this isn’t the case. There are tons of different ways to invest in real estate.
Real estate investment is actually incredibly versatile, and there are constantly new and innovative ways of investing becoming available.
Not only can you invest in multiple forms of real estate, but you can also get involved in various ways. It really is a fun and exciting way to invest your money.
7. It Is a Great Way to Save for Retirement
Real estate has always been a popular form of investment for retirement. Many people purchase houses and turn them into rental properties as a “pension pot”, and this is because they really are a great way to save for retirement.
This is mainly because real estate is designed to be a long term investment. When you first purchase a home, then you will not have much equity in the property.
But, over time the amount of equity that you have will grow. This means that you can sell the property when you plan to retire, and then use the money from the sale to get you through retirement.
As we say, real estate investment has been a popular savings route for retirement for many years, and that is because it works!
8. It Doesn’t Require Lots of Capital
Finally, real estate investment is a good way to save for retirement because it actually doesn’t require that much capital. A lot of people assume that you need a ton of money to invest in real estate, but this isn’t the case.
Typically, you will only need between 20 and 30% of the value of the property to purchase it, thanks to the wide range of mortgages available.
So, you can leverage your investment and purchase a property that is worth a lot more than what you have paid. Whereas with other types of investment, you will need to have all that capital up front, making real estate investment a little more achievable.
Why Is Real Estate A Good Investment?
In this guide, I have taken a look at 8 of the best reasons why real estate is a good investment. So, if you are considering exploring new investment routes, check out this guide to see why real estate could be the right type of investment for you!
Frequently Asked Questions
Why Is Real Estate Often A Great Investment?
There are tons of benefits to real estate investing, and that is why it is often seen as a great investment. Some of the reasons why real estate is considered a great investment include: tax breaks, cash flow, and equity building.
Why Is Real Estate The “Safest” Investment?
A lot of people consider real estate investment to be the “safest” investment, and there are a number of reasons for this. One of the main reasons is that the real estate market is a lot less volatile than other investment opportunities.
Plus, real estate investment gives you a tangible asset, and that makes it a lot more secure than other types of investments.
Is Real Estate The Best Way To Build Wealth?
Real estate investment isn’t necessarily the best way to build wealth, but it definitely is a good method.
Real estate investment offers tangible assets, and these tangible assets can be used to generate passive income which can lead to huge amounts of wealth if you make the right investment.
Paul Martinez is the founder of BendingDestiny.com. He is an expert in the areas of finance, real estate, and eCommerce.
Join him on BendingDestiny.com to learn how to improve your financial life and excel in these areas. Before starting this blog, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.