As we begin a new year, you may be considering your financial goals and priorities. Perhaps you are considering investments and making plans. Is real estate investing on your agenda? There are several positive reasons to consider adding a real estate investment to your portfolio. We’ll take a high-level approach to some of the benefits.
Intrinsic Value: Real estate is a “real” asset. You can see, feel, and touch it. Whereas some investments are harder to conceptualize, real estate is tangible. When values increase and decrease, some investments are harder to visualize. For example, there may be a decrease in the stock market, but all the owner sees is the end number. In real estate, the home, building, or land remains visible and usable, even when ups and downs occur.
Appreciation: Over the course of time, real estate tends to appreciate. Of course, with any investment, swings occur, but since 1952 there has been approximately a 5% increase annually for residential real estate. This is driven both by scarcity of land and materials and long-term inflation. For many people, real estate becomes a nest egg. The inflation may not always be noticeable, but over time it occurs, providing a level of security for real estate owners.
Leverage: Most real estate investing includes a loan against a property. The rule of thumb for real estate investing is to put down 25% or more of your own money. However, if you utilize a loan for the remainder of a purchase amount, gains on the property are on the total amount (your money and the bank’s money), allowing you to utilize the bank’s money as leverage for total gains.
These are just a handful of reasons real estate remains a solid and wise financial purchase. As we head into the new year, our team is available for any questions, or to discuss your real estate needs further. Whether you are considering your first real estate purchase as a primary residence, or you are a long-time investor, there are strategies to consider and options available in our area.