Real Estate Is The Best Investment – Here is Why
Financial pans will always have real estate as one of the lead investments. One of the reasons for this is because real estate investments tend to have a more predictable cash flow: which makes future planning much more straightforward. And in general, it will have a higher return because of the positive leverage.
So what else makes it the best investment?
This is an interesting one because, according to the National Association of Realators, even doing the downturn of the economy that began in 2007, depreciation levels of real estate have risen by 6% per year since 1968.
You can purchase an almost dilapidated building, and with enough time and money, you can turn it into an absolutely priceless masterpiece. So imagine that you bought this property at $40,000, and you only need to spend $20,000 to add extra rooms to improve and modernize the interior, to add some unique features. And by the time you’ve finished the property and the ground that it stands on is worth $200,000 or more.
That’s a relatively small cash and time investment for a considerable return. And instead of selling the property, if you were renting out, you would more than make your investment back over the years.
Another thing that makes buying property is incredibly interesting as an investment is that usually by the time you reach investment, all of the properties that you have in terms of the mortgage will be paid off. And this means your cash flow is likely to increase around this period two.
People often consider this as a forced saving program. You will get a more significant amount of cash as time goes by. Which is why real estate makes the perfect investment for your retirement.
If you happen to sell your interest in the property after just one year, the game will be subject to capital gains tax rates. And depending on your individual tax bracket, this will generally be 15 or perhaps 20%, which is usually less than the personal tax bracket.
Unlike stocks and shares as you can very easily predict the cash flow that you will get from your investment properties. Cash flow is the net spendable income that will be derived from the investment after operations, and mortgage payments have been made. What you are looking for here is at least 6% or greater cash flow.
This might be classed as one of the most essential advantages of real estate investments. It is leverage. This is the use of borrowed capital to increase the potential return of an investment. Once you have built up an equity position on your investment property, you can leverage that investment for cash in a couple of ways. One of these is to finance the original loan amount, plus the increased equity, and the other is to secure a second loan against the increased equity.
These both free up money for you to purchase your next real estate investment property.
And finally, one of the easiest things for anyone to understand about real estate investment is that it is easy for almost everyone to achieve. Although there is a lot of paperwork involved, there aren’t really any such insurmountable financial barriers to entering the property market.
Which is why it is perfect for most people as their first investment.