Is real estate investing worth it? Why don’t you just dip your money in the stock market, or precious metals, or anything else out there? Real estate has the greatest safety-to-return ratio out of any investment, and has been a key to capitalism for decades.
“Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined.” -Andrew Carnegie
Let’s discuss the five factors of why real estate is the best investment:
- Predictable Cash Flow
- Tangible Assets
- Appreciation of Assets Overtime
- Consistency & Safety
Predictable Cash Flow
“Landlords grow rich in their sleep without working, risking or economising.” -John Stuart Mill
When you invest in Real Estate, the cash flow is more predictable than any other investment. If you choose to own a physical piece of real estate, you will receive a high-paying check every month when you have a good tenant in your home. There are other ways of receiving predictable cash flow from real estate, but investing in the physical property is the most common method of real estate investing.
If you choose to invest your money in precious metals such as gold, or silver, you are hoping that the value will appreciate over time. However, there is no cash flow. You aren’t receiving a check for owning the gold, you can only hope that in-time, you will be able to sell the gold for more than you bought it for.
When you invest in stocks, you are hoping that capital appreciation will deliver you a profit in years to come.The only strategy that provides consistent, monthly cash flow is investing in REITS, which is a form of real estate! The only other method that produces consistent cash flow in the stock market is Dividend Growth Investing, and you are only paid once every quarter, or four times a year.
“The bottom line: investing in real estate is smart because property is tangible. People always have, and always will, need shelter. This means it is very unlikely that our need for shelter will ever go away.” -Kathy Fettke
In most real estate investing, you will own a tangible asset that you will have control over. YOU decide how to much to rent it for. YOU decide what to upgrade. YOU decide who stays in your home. You don’t get these decisions with other investing methods, and this one of many reasons that real estate is the most popular form of investing among the rich- even though anyone has access to it.
When the stock market closes, you lose access to your assets. If the market closed for a significant period of time, you wouldn’t have that asset for a significant period of time. With gold, you have a tangible asset, but as a stated before, it isn’t paying you anything. With real estate, you have an asset that 1. Provides a purpose to normal people and 2. Will always be there.
Tangibility is typically one of the deciding factors when people decide if real estate investing is worth it.
Appreciation of Assets Overtime
“Real estate is an imperishable asset, ever increasing in value. It is the most solid security that human ingenuity has devised. It is the basis of all security and about the only indestructible security.” -Russell Sage
Naturally, things improve, and as they improve, so will the value of your property. If you maintain your property well, and it is in a good location, the value will go up— as will the rents. For example, a property purchased for $86,000 ten years ago rents in this area for $1200 a month, and it is now worth $120000 as well. Imagine renting it out every month since purchasing it. Assuming rent started at $800 ten years ago, and gradually moved to twelve, we can say that you would have earned a total gross profit of $154,000. That obviously doesn’t include taxes, or cost to maintain, but it is still a tremendous amount of profit if you invest in a rental property in a good area
That is an example of what happened in my neighborhood, and it could happen to you. Obviously you need to find a growing market, and a town that is consistently improving. If you are in a bad location, the value of your rental property could go down. Typically, your property follows the value of those around it. If the neighborhood value goes down, so does your property.
Consistency & Safety
“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” -Franklin D. Roosevelt
When you own an asset like a rental property, you receive peace of mind. Active investors in the stock market consistently stress every month, wondering if the value of their shares are going to increase or decrease. Passive investors in real estate consistently relax every month, knowing that the value of their property will appreciate and that they will get paid more than enough to cover their mortgage at the end of the month.
When there is a market correction, you won’t lose any money in real estate. You will in stocks though! Stocks are much more volatile than real estate, and you can lose a lot of money. The only risk in real estate is in huge crashes, like the coronavirus crash, or the recession. The only threat you have is tenants being unable to pay their monthly rent. Solution? Find renters in a good financial position, with a great credit score. While it isn’t a foolproof plan, it can certainly diminish the risk involved in real estate. As there is risk in any investment, this is the primary risk in real estate.
When deciding if real estate investing is worth it, look at the consistency and safety of other investment vehicles as well. If you believe that stocks are safer investments than real estate, go for it. Perhaps you believe that crude oil is a safer investment than real estate? If so, go for it.
Consistency over time is what pays.
“Real estate investing, even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth.” -Robert Kiyosaki
Real Estate is the most relevant investment someone can make. Gold can only remain relevant as long as people see value in how it looks. A stock can only remain relevant as the company you’re invested in remains relevant. Real estate is ALWAYS relevant. People will always need a place to live, and people are renting now more than ever.
The five points shown here are examples on why real estate is possibly the best investment someone can make. Investing in real estate can be a lifechanger, as it has been for many.
Is Real Estate Investing Worth It?
This is the question that you came here for, and I cannot answer it for you. Hopefully these five points helped influence your judgement. If you ask the billionaires, such as Grant Cardone, Donald Trump, Warren Buffett, they love real estate!
But is it the best move for you? Review the information, and ask yourself— is real estate investing worth it?