Should I Really Invest In Real Estate?

Are you financially stable? Probably not as much as you’d like to be if you’re like most people. However, if you have some money to invest, you’re probably looking for a method that will have a high yield with as little risk as possible. While technically speaking, no such investment exists (because more risk means more reward), we have to say that one of the best options is real estate.

Sure, there are a lot of investment options out there, including stocks, bonds, gold, and lending services, but real estate is one of the better choices because it creates many more opportunities than you might think.

Today we want to take a moment and highlight all of the reasons why real estate investing should be on your radar. If you haven’t taken advantage of it yet, then now is the perfect time to see how you can cash in on this lucrative industry.

How to Invest in Real Estate

Before we look at the various advantages (and risks) associated with this type of investment, we should first establish how you can get into this business.

There are a few different ways that you can invest in real estate. They are-

Buying Land – in this case, the land itself is valuable. Usually, you want to hold onto it until you can get a lucrative deal from a developer.

Buying Rental Properties – whether it’s a strip mall, an office, or an apartment building, you will own the property and people will rent space and pay you a monthly sum.

Investing in Real Estate Companies – if you don’t have enough capital to buy real estate on your own, you can instead work with a company and contribute to their business. This is becoming a more popular option, as investment amounts are much more affordable.

The ROI of Real Estate

One of the most significant risks associated with real estate investing is that once you’re the owner, the buck stops with you. That means that anything that happens to the land or the property is your responsibility. If you’re part of a larger real estate group, then that’s not the case, but the danger is still there for everyone involved in the business.

Thus, determining your return on investment (ROI) can be much trickier to lock down. Unlike stocks, which have past performance and the overall market to use as guidelines, real estate is much more ambiguous, particularly depending on the route you take.

Nonetheless, many would argue that while there are more risks and money involved, the ROI can be much higher and much more long-term than stocks.

Let’s take rental properties for example. Many real estate investors love buying these types of properties because they get checks every month from their tenants. As long as maintenance and upkeep expenses are less than rent, you’re putting money in your pocket every month.

In this situation, it can be much easier to determine your ROI. Let’s look at a few potential scenarios.

Buying a Rental Property In Use

Let’s say that you buy a small office building that already has tenants inside. You can look at what they currently pay in rent, what the monthly fees on your end are, and then determine how much profit you’re making in the end.

Buying a New Rental Property

In this case, you have a new building that has no tenants yet. This puts you in a better position because you can set the monthly rates based on what you want your profit margin to be. While the market may force you to be a little competitive, if you’re in a high-demand area (think Southern California), then you have a lot more flexibility.

In either case, determining your ROI is much easier than if you were to buy land. However, if that is your primary goal, let’s look at how you can get the most out of your investment.

Benefits of Real Estate Investing

Long-Term Earnings
One of the primary reasons why people get into this industry is that they like having tangible assets that will earn money forever. While you can’t necessarily predict what the market will do, being in the right place will ensure that you won’t have to worry about owing money on your property. For example, building in an area with a growing population is a smart move because the demand for property will only increase in the coming years.

Competitive Returns
When you analyze all of real estate investing, the average return is about 9.85%, which is better than most other options. The stock market is a little less than that, and other investments like lending or bonds pay significantly less annually. As long as you manage your variables efficiently, you could be looking at some strong profits, year after year.

Inflation Hedging
One excellent thing about having real estate is that its value can go up over time, not diminish. Whereas products (like cars) will decrease in value, real estate usually keeps up with the market. As areas grow and become more desirable, your property will only become more valuable in the process. Again, there is no guarantee, but the likelihood is much higher than with other investments.

Tangible Assets
When you have stocks, they can add to your overall net worth, but they’re only valuable if you can cash them out for real money. While they’re invested, they don’t provide any real value beyond what the market says.

With real estate, however, you have a physical building or a piece of land. No matter what happens in the market, you will continue to own that property. Thus, when it comes to assets, real estate offers a much more tangible assessment.

Bottom Line – Invest in Real Estate

While you should diversify your money in a variety of investments, real estate is one area that will usually work out in your favor. As long as you don’t get in too deep without a plan in place, you should be able to reap the rewards without too much risk.