Throughout my many years of being a real estate agent, I have heard the same question at least once a month. “Why should I invest in Real Estate?” It seems that everyone who is on the fence about investing has this question. For me, the answer was simple, I saw that the trend in real estate has been a steady growth. Over the last 5 years it, Real Estate have provided better and more consistent yields than other investment opportunities.
Return on Investment
Through typical investments, like stocks, Bloomberg states that,” The average investor realizes returns of about 3.7 percent.” This means that if you invested around $100,000 in the stock market you could expect to get around $3,700 return for that investment. Now when you compare that to Real Estate, the average rental property can see a 10% to 12%. So if you took $100,000 and invested in rental property, you could expect to have a return of $10,000 to $12,000 dollars. That is a 270% increase on stocks. That is on the low end as well. We currently have properties that have a RoI of 18% so you could see a greater than 500% increase over stocks. To me that sounds like a much better investment
Rents usually increase with inflation, while mortgage payments on the property remain stable. This increases cash flow, without the increased expense for holding the property. When inflation goes up, it can also mean more renters as mortgages become more expensive for average consumers. More renters increase demand, so rents can escalate.
There is a great article on biggerpockets.com called “The Ultimate Guide to Real Estate Investment Tax Benefits.” I highly recommend you take some time to read it but I am going to call out a few important parts. The section on depreciation is very detailed and I love this part,” This is why depreciation may be a benefit to you, the landlord. We all know that property values generally go up over time, and anything that breaks down on the property we are able to deduct separately anyway. Therefore, depreciation on real estate is often known as a “phantom deduction” because although we deduct the cost, the actual loss never really occurs.” This is one of the immense benefits of real estate. The same benefits are not there when it comes to stocks.
I hope this weeks post has been informative, as always if you have any questions or would like to get some more information, feel free to call us at 9014178427 or email us at email@example.com