Is Real Estate a Safe Investment
Being a homeowner is the epitome of the American Dream. By purchasing property, you are increasing the wealth of your family long term. Sure, you may need a home to live in. So, that justifies buying a house. Still, what about investment properties? Are they worth it, or does it make more sense to invest in the stock market? With high interest rates and the increase in the demand for homes, you may be asking yourself if real estate is really a safe investment.
The Value of Land Always Increases
One of the reasons why real estate is considered a safe investment is because when you are buying real estate you are buying land. Land can sometimes make up over 50% of your investment.
The great thing about land is it is a limited resource. As a result, the price of land will continue to go up. This means that your real estate investment value will also increase.
You also have the option of building more rentals onto your land. For example, you can convert a single-family home into a multi-family property. More rentals mean more income generated. Your children and grandchildren can also inherit the land.
Real Estate Is a Tangible Asset
When you invest in real estate, you are investing in a tangible asset. Other forms of tangible assets are art, antiques, gold bullion, and collectibles. In the thousands of years that we have used it, gold has never had a zero value.
Like all tangible assets, gold always has economic value. Owning a tangible asset allows for diversification to protect against economic uncertainty. Should something happen with the market you own something physical. If you are unable to rent your rental property, you can live there yourself or sell it. With the stock market, losing money means having nothing.
There Is Stability in Real Estate
Investing in the stock market means contending with high volatility. In a short period of time, you can make a lot of money but you can also lose a lot. The real estate market does experience some volatility.
However, volatility in real estate is significantly less when compared to the stock market. Investing in real estate is a safer option than investing in the stock market as there is less risk.
Real Estate Appreciates Long Term
If you look at the long-term trends of real estate, they always go up. They may not increase annually in a specific neighborhood, but long-run appreciation always happens.
So, if you buy a home today, chances are you can sell it for more money in 10 or 15 years. One of the main reasons behind this is land. Land is a limited resource. As a result, it will always go up in value. This fact makes it a safe long-term investment.
Owning a Rental Property Allows for Passive Income
Not only can you ear money in the long term with real estate, but you can also earn money in the short term. With an investment property, you can rent it out to tenants and create positive cash flow.
Your rental income should be able to cover recurrent costs, like the mortgage and property management, and give you a little extra for your trouble as well. When you buy stocks, there is no guarantee that you will make money every month or year. However, rental properties can provide you with income that replaces your day job so you have time to do the things you actually want to do.
Protect Your Money from Inflation
Inflation is when prices go up over time. It is a factual part of life. Investing in real estate can serve as a protection against inflation. This is because as prices go up the prices of real estate increase even faster.
Appreciation in real estate usually overcomes inflation. As a result, it is a hedge against inflation. So, when you are investing your money in real estate, you are protecting it from losing its value due to inflation.
Anyone Can Invest in Real Estate
Investing in stocks requires that you have expertise in financial markets. Gaining this knowledge can be very difficult. With real estate, you do not need to know a lot to start investing. The reason is investing in real estate is really about common sense.
You gain knowledge in real estate by doing. In order to gain experience in being a landlord, you have to actually buy a property. Investing in the stock market can be risky for the inexperienced. However, real estate is a relatively safe option for beginners.
The Wrap Up
Real estate is a safe investment for a number of reasons. Land value always increases because land is a limited resource. Real estate is a tangible asset which means you can always rent it or sell it if you need money. Investing in real estate is a less volatile option when compared to the stock market. Real estate appreciates long term. You can earn passive income with a rental property. Investing in properties can protect the value of your money against inflation. Anyone can become a landlord with minimal risks compared to the stock market which requires expertise. All these reasons point to why real estate is a safe investment.