Everyone aspires to own properties. Nevertheless, Is it wise to invest in real estate?
Real estate can be a worthwhile investment that can compete with and often outperform stock market returns, but it is not without risk and effort. The following are some of the reasons why real estate investment is worth the effort.
There isn’t just one significant advantage to investing in real estate; instead, there are multiple advantages that, when taken together, make this asset class a good investment. A real estate investment, like stocks, can appreciate over time while also providing a source of cash flow from rental or mortgage income.
Unlike stocks, however, real estate is a tangible asset that can be leveraged while also providing substantial tax benefits, such as depreciation and tax deductions, which can help decrease capital gains tax.
Real estate investors rarely consider a single benefit as the only basis for investing but rather a combination of benefits. When other gifts of real estate are added in, the return is significantly bigger. It’s not uncommon for investors to obtain double-digit returns (meaning 10% or more) with an investment property. Still, when other benefits of real estate are factored in, the return is far greater.
It does, however, have some disadvantages. Real estate investments often necessitate a great amount of effort, especially if the investor intends to own or manage the property. Although outsourcing property maintenance or investing in a real estate crowdfunding opportunity can make it a more passive investment, real estate investing still involves effort.
Ongoing costs also accompany real estate ownership. Properties must be adequately maintained, renovated, and managed to protect the investment. The investor is responsible for paying annual property taxes and insurance. You have the added obligation of dealing with tenants if you own a rental property.
Real estate, like any other type of investment, is subject to market swings. Economic recessions have an impact on both the stock market and real estate. Reduced demand, excess supply, natural calamities, and vacancies can negatively influence investment returns.
According to a well-known quote popularized by the internet, real estate has produced 90% of millionaires. While this figure has yet to be confirmed, it is widely assumed that most high-net-worth individuals invest at least a percentage of their wealth in real estate. Real estate investing has a lot of potentials and can be an excellent way to diversify a portfolio.
It is ultimately up to the individual to decide if real estate investing is worthwhile. However, in most circumstances, the advantages and risks outweigh the disadvantages and hazards. It’s just a matter of determining the best investment plan and opportunity for your financial objectives.