The purpose of investing in real estate or any other form of investment is to make your money grow so that you can secure your future. Every form of investment holds its own advantages and disadvantages. In this article, we will compare real estate with other investments to help you decide what kind of investment opportunity is better for you.
Real estate is one of the oldest forms of investing and the securest one too. Real estate investment means investing in lands and properties. The properties can either be residential, commercial or industrial. Most of the time, real estate investing means purchasing the properties and then renting them out. The monthly rent coming in every month and the appreciation in the property’s value are the two most common ways to make money in real estate.
The main difference between real estate and other investments is that real estate is the most stable form of investment. As in the stock market, you never know what is going to happen. One minute the value of your shares is extremely high and the next minute you may be selling them at extremely low prices. This kind of unpredictability is enough to make anyone lose their interest. Moreover, as with the other investments, anything that would happen to your investment will be fully dependent on the market’s overall performance.
On the other hand, real estate investment eliminates such risks. It gives you full control over your investment. Once you buy an investment property, you have the option to increase its value by adding some minor fixes and maintenance. Anything that happens to your investment is totally up to your decisions. Almost everyone can invest in the real estate business because there are not many technicalities involved.
One of the reasons to invest in real estate is the higher number of returns. Real estate is an ownership investment that produces better overall returns as opposed to the other investments. It produces cash flow in the form of rent and appreciation in the property’s value. The annual return on real estate investment is 10% which is higher than non-ownership investments. The rate of returns can also be increased depending upon the structure and location of the property.
The development of blockchain technology has made it possible to liquidate real estate assets. You can now become the owner of a fractional share of a property. A digital token represents your ownership of that particular share and is stored in your digital wallet. You can sell your particular share to anyone in any part of the world by striking a few keys on your computer. All you need is an active internet connection.
3. Adding Value
Unlike stocks and bonds, you can maximize your returns by adding value to your property. Value of the property can be increased in several ways including maintenance, repairs, paint job, etc. By doing so, you will not only boost your cash flow but increase the entire value of the property as well.
4. Risk Reduction
Investing in real estate saves you from potential risks as well. Because of liquidation, the risk of losing it all in a single investment is eliminated. You can invest in multiple investment opportunities worldwide and increase the sources of your income stream. This will also help you gain exposure to better markets as well.
5. Tax Benefits
Real estate allows major tax benefits in the form of depreciation. Depreciation is an allowable tax deduction for buildings due to their wear and tear over time. According to the law, residential properties are depreciated over 27.5 years and commercial buildings are depreciated over 39 years. You can enjoy tax reduction on rental properties too. You can do that by investing the profit you earned over one investment in buying another similar investment property.