Gallup polls continue to report real estate as the preferred investment choice for Americans, topping stocks and besting gold for another year in a row. Surprised that real estate beats out gold with American investors? Read on to discover four reasons why real estate investing is the safest choice.
With many advisors predicting the end of the bull market, investors with all of their eggs in the stock market basket could be headed towards losing the gains they’ve experienced over the last eight years or so. Real estate, however, is much less of a gamble and far more accessible for potential investors.
Low-risk
Unlike the stock market, which is unpredictable at best, real estate investors can make market predictions based on hard data to direct buying and selling properties, significantly lowering the risk of their investment. Indicators, such as supply, pending sales, and new construction data can guide investors into making solid, educated investment choices.
For the lowest overall risk, choose to invest in land. If you’re buying land, you can enjoy absolutely no depreciation value—you will not lose money on your investment. While fire or other natural disasters can level buildings, land is immutable. You can’t move land, and it really can’t be destroyed—either by natural disaster or unnatural causes.
Generally speaking, real estate value appreciates over time. While wage growth may flounder, the immutable constant is the demand for residential real estate, which is slowly surpassing supply in the market. The low-risk nature of real estate investing is why so many choose to invest in real estate for retirement.
Great returns
In addition to the low-risk factor, real estate investing is guaranteed to provide significant returns. While the housing market may fluctuate over time, property owners can consider their investment a sure bet with long-term appreciation. The property you purchase today is virtually guaranteed to be worth more, five to ten years from now. That being said, real estate is not exactly a quick return, so plan for a long-term investment when buying properties.
If you view real estate investing as the act of acquiring land (with or without a structure) in a climate where land is becoming a more limited resource, land is an excellent long-term choice. Over time, your land purchase will increase in value as the U.S. continues to grow more populous, year after year.
Excellent source of passive income
Play your cards right, and your property will pay for itself. Investing in rental properties is an excellent way to create a passive income flow, perfect for retirement. Stocks don’t always pay out monthly—sometimes not even yearly—but income properties that are rented or leased payout regularly. Whether you’re renting to tenants or leasing land to farmers, investing in an income property can provide for you nicely, with little to no work on your part.
Keep in mind that rental properties are only passive income if they’re low maintenance. If you buy a vacation rental or an area with high turnover—college rentals, for example—you can guarantee that you’ll be anything but a passive landlord. While hiring a property management company can [mostly] remove you from the day-to-day running of rental properties, you’ll also be taking a chunk out of your profits for the convenience. Plan your income properties wisely to ensure that they’re a passive source of generating income for you.
Variety of options
The beauty of real estate investing is that there is an option out there for every type of investor. While they’re all relatively low-risk, some properties require maintenance and a level of involvement from you, while others are pretty much hands-off. Your desired level of involvement will determine the options that are the perfect fit for you, as well as the amount of money you’re prepared to invest. For example, compare owning a lot of land, which requires little to no maintenance, to an apartment building or strip mall, which must be maintained and creates a more complicated tax situation. Each property type is representative of a different level of financial and time investment, allowing you to choose the option or options that are right for your situation and comfort level.
For cautious investors, it’s clear that real estate investing is the safest choice. Providing low-risk investment opportunities with great returns, real estate can be an excellent source of passive income. The variety of options for those looking to get into the real estate game ensures that there’s a fit for everyone.
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