Why Smart People Prefer Real Estate Investments?
Do you know the world-famous Mc Donald’s is not a food chain, but a real-estate firm? Yes, it is a real estate company with a net worth of $30 Billion and still counting. Real estate investments are a real treasure for those who know how to do it well. Most of the real-life rags to riches stories hail from this sector.
There are numerous reasons to invest in real estate. It is one of the most profit yielding markets which is emerging by leaps and bounds with time.
Today, let’s see why smart people prefer real estate investments over other investments.
It Never Goes Out of Track
Just like eating, clothing and sleeping, housing is an essential human need. In the US alone, the number of vacant houses is five times that of homeless people. People will always seek to have a home, an office or other architecture as per need. Consequently, the real estate market is a sector that will always be in demand and will rise over time.
However, there will be several aspects to take into consideration for your real estate investment strategies. Analyze the economy, location, urban development, market trends, etc. Keep in mind that the location of your buildings will always remain one of the determining points in the success of your investments.
No Huge Amount Needed – Benefit From The Leverage Effect
Here is a term we often hear in the investment industry: leverage. This allows you to acquire assets with very little of your cash. The principle is very simple – you will borrow the funds in terms of loan. There are properties that you can acquire with 10% down payment if your loan is insured by a reputed mortgage insurer.
With this policy, you will succeed in acquiring an asset of the order of $ 50,000 with only $ 5000 in cash. After some time you can resale the property at a profitable amount. Using the leverage effect makes real estate investment accessible to everyone.
You Can Make Quick Money With The “Flips”
There are many types of real estate investment. Among them, real estate flips have been around for a very long time. The principle of buying a good asset and reselling it for a profit is the basis of this business strategy. It allows you to generate cash flow faster compared to purchasing rental properties, and also allows you to enhance your real estate empire rapidly.
Flips are the best way to make a quick living from real estate. But remember, patience has its virtues. Longer you wait to sell a property, more are the chances to increase the profit.
While flips can generate cash quickly, the long-term purchase of rental properties generates recurring cash flows monthly. That’s the first return on your invested money. Plus, you’ll get a second return when your tenants pay off the building mortgage. The portion of capital repaid will be larger. Eventually, you’ll earn a third return as your property grows in value over time.
In summary, it will take longer with the rental real estate to generate cash in your bank account but be patient. Just like your net worth, cash flow will grow over time and one day you will achieve financial independence.
Control Over Investment
Real estate is controllable. You own property and assets and have decision-making power over several determining factors. For example, you can decide –
- The price you will pay for the building,
- In which area you will buy,
- The person who will manage the building,
- What kind of customers will enter your buildings,
- What price of rents will they pay,
- What will be the inclusions and exclusions of the agreement etc?
Control over your investments is important and real estate offers this undeniable advantage.
All the above clearly answer – why more and more people are inclining towards real estate investments. If you are also planning for it, then we recommend you to read real estate investment strategies for beginners before stepping in this industry. It will help you to learn about different types of real estate investment and which one will serve best to you.