5 Reasons to Invest in Real Estate
By Paul Esajian on February 11, 2019
With all the various home flipping and renovating shows currently on TV it is easy to forget why you are in real estate in the first place. The goal of any investment is to realize a return on your capital. This sounds obvious, but it can get lost during a busy rehab or flip deal. From the outside, real estate seems like a much more difficult, and risky, investment when compared to the stock market. The reality is that real estate is not only safer, but often offers much more upside. If you have been thinking about getting started in real estate don’t listen to the negative voices telling you not to. Real estate isn’t easy, but it can be the most rewarding form of investing you can do. Here are five reasons to consider getting started investing in real estate.
- Lack of Volatility. The market crash of 2008-2009 left a tremendous impression on the general public. When people talk about real estate they seem to consider how much the market changed in 2009. While this is certainly the case, they often ignore the years of double-digit gains in the months and years prior. When pitted against the stock market real estate is a much safer, and less volatile option. Stock prices can have wild swings on a daily basis. Unless you are investing for the long term and don’t care about daily volatile, investing in stocks is full of stress. Since 2009 home values have inched higher over the last decade. If you are looking for a safe place to park your capital, you can’t do much better than a rental property. There are always monthly, or seasonal price dips, but over time rental properties are a safe investment.
- Improved Technology. It is amazing to think just how much real estate has changed over the years. It wasn’t that long ago when if you wanted to see a new listing you would have to schedule a listing appointment, drive to the property and do your homework at town hall. Today, with advances in technology you can do most of your due diligence from the comfort of your own home. Technology has made it that you don’t need to be a full-time investor to dabble in real estate. In fact, there are many investors who retain their full-time employment while building their portfolio. They not only utilize the people around them, but they use technology to help guide them. Whether it is lead generation, marketing, property due diligence or general education technology and the internet has changed the way investing is done. It is not a stretch to say almost anyone can invest, almost anywhere and almost anytime.
- Control Over Asset. With most investments you are at the mercy of the investing instrument. When you buy a stock there isn’t much you can do to control the stock price. You are hoping that your valuation is right, and the public feels your sediment. If you put your money in a low interest bond, CD or savings account you know for years what the return will be for the foreseeable future. With real estate, you have a direct influence on where and how the value changes. You can’t change the market, but you can make improvements to the property that will influence the value. Adding an extra bathroom, a deck or a garage costs money, but often provides a tremendous return on your investment. The property value will increase, and your percentage return is much higher than anything else you can do. The ability the see, feel, touch and ultimately improve the property is something that makes real estate very appealing.
- Capital Requirements. One of the most attractive aspects of real estate investing is something called leverage. With most other assets and investment options you need the entire amount of the asset to gain ownership. With real estate you can become 100% owner with anywhere from 1-25% down payment. This is a very powerful tool that not every investor takes advantage of. What also makes real estate investing so great is that there is a price point for any investor in every market. You don’t need to look at properties valued at $500,000 or higher to make a profit. In some markets you can make a double-digit ROI on price points of just $50,000. You do need money to invest in real estate, just not nearly as much as you may think.
- Multiple options. There is more to investing in real estate than rehabs and flips. Although this is currently the most popular form of investing, it is far from your only option. Many investors shy away from rehabs and solely focus on buy and hold rental properties. They enjoy getting monthly cash flow, while building appreciation and equity. They view their rental as a long-term asset they can improve over time. If flips and rentals aren’t your thing, you can look to wholesale deals. This is simply the process of finding quality deals and passing them along to end investors. You receive either a flat fee or small percentage of the bottom line but can quickly move on to the next deal without any restrictions. These are just three of the many options available to you in the world of real estate.
Real estate has produced more millionaires than any other business. Even if you don’t aspire to make millions it is a great way to supplement your income on a part time basis. If you have been interested in the business for some time, don’t wait to get started today.