6 Reasons Why Real Estate Is the Best Long-Term Investment
It’s a well-known fact that real estate is one of the best long-term investments a person can make. Over time, property values tend to go up, and it’s a relatively safe investment compared to others. But what are the specific reasons why real estate is such a good investment? Here are six of them:
1. You can use leverage
When you buy a property, you usually only have to put down a small percentage of the sale price – typically 20%. This means that you can control an asset worth much more than the amount of money you actually invested. Leverage is one of the key reasons why real estate is such a good investment.
Imagine if you had to pay for an entire stock in one go. You would only be able to buy a very small number of shares, which would limit your upside potential. But with real estate, you can control property worth hundreds of thousands of dollars by only investing a small amount of your own money.
2. It’s a physical asset
Real estate is a physical asset that you can see, touch, and feel. It’s not some abstract investment like a stock or bond. This makes it much easier to understand and value. And because it’s an asset that you can visit and inspect, you have much more control over it than other types of investments.
3. It produces income
Investment properties can generate income in the form of rent payments. This is money that you can use to cover the mortgage payments, property taxes, and other expenses associated with owning an investment property. And any money left over is pure profit that you can pocket or reinvest back into the property.
While stocks and bonds can also generate income, it’s usually in the form of interest payments or dividends. With real estate, you have the potential to earn much higher returns through rental income.
4. It appreciates over time
As mentioned earlier, property values tend to go up over time. This is due to a number of factors, such as inflation, population growth, and economic expansion. By owning an investment property, you can benefit from this appreciation, which translates into capital gains when you eventually sell the property.
5. It’s a hedge against inflation
Real estate is a great hedge against inflation because it tends to go up in value along with inflation. This is in contrast to investments like stocks and bonds, which can lose value during periods of high inflation.
For example, if inflation is 3% per year and your rental income also increases by 3% per year, then your property is effectively maintaining its value in real terms. But if inflation is 5% and your rental income only goes up by 3%, then your property is losing value in real terms.
6. It’s a tangible asset
Real estate is a tangible asset that you can see and touch. This makes it much easier to understand and value than other types of investments, such as stocks and bonds. And because it’s an asset that you can visit and inspect, you have much more control over it than other types of investments.
These are just a few of the reasons why real estate is such a good investment. If you’re looking to invest your money for the long term, then real estate should definitely be on your radar.