In this day and age, the investment options have become abundant to the point of confusion. And whilst this variety of options may suit experienced investors who want to expand and diversify their portfolios, newcomers may have a problem sorting out through all these courses of action.
Enter the real estate market, which has always served as a perfect playing ground for all the people who have the money but don’t like too much risk. But, what makes real estate such a safe investment option and why should you enter this arena right now?
Let us try to find out.
Less volatility than the stock market
In the world of real estates, the risk of loss can be greatly reduced by the length of the time you hold the property. If we take a look at the history of the industry, we can see that the market has proved to be incredibly resistant to sudden price fluctuations. If you are not flipping the properties or making frequent transactions, the very fact you are holding on to property can help you tame these volatile changes and continue generating wealth through income capital.
A stable passive income flow
If you find reliable and high-paying tenants and reach the agreement over the long-term lease, this period of stable, uninterrupted income returns can stretch for entire years. While you are making those earnings, your duties are kept at a bare minimum. You will need to take good care of the maintenance, be quick to respond to tenants’ requests, and make a long-term upgrade plan that will keep your investment competitive in years to come. Still, the ample earnings that usually cover the price of the mortgage are making these minor efforts more than worthwhile.
The banks love properties
Historically speaking, the banks were always more than willing to back up the investors who are venturing into the real estate market. So much so that some countries like Australia were forced to step in and ask the banks to curb the enthusiasm of property investors by introducing higher interest rates. Even so, appealing to banks still makes the most streamlined way of ensuring the investment funds, and the inherent market stability makes sure these appeals won’t fall on deaf ears.
The value of properties increases as time goes by
One of the best things about properties as an investment option is that they possess tangible value. And unlike some other assets, their value doesn’t decrease over time. On the contrary – smart investments will produce substantial growth. If we, once again, take a look at the Land Down Under, we can see that the real estate in Northern Beaches (Sydney’s coastline suburban area) is projected to undergo a significant value increase in the following years due to favorable and opportune location.
As even the most inexperienced investors know, diversification produces a more stable portfolio. Taking into account real estate’s inherent stability introducing this income flow into your set of options can increase the value and balance out even the most volatile investment strategies through fluctuating economic cycles. As long as you are aware of the relative difficulty in converting these assets into money, your portfolio can only benefit from this type of diversification.
The ability to leverage tax-breaks
Taking into consideration that properties are hard assets that play a large role in governmental wellbeing, the policies that local governments are usually ready to offer to property owners various monetary reliefs which is a rare case with the other investment options. In most of the cases, these reliefs come in the form of tax breaks and writing off of interest rates, property management fees, and maintenance fees. These benefits can go a long way in making the average investments much more valuable.
You are negotiating the price
The one thing that connects all the currently available share markets is that you are buying and selling assets according to their market price, without much say in the matter. The real estate market is completely different – the value of the rents and the very property is more than open to negotiations. And talking into consideration that the real estate demand far outweighs the offer, you have a very strong bargain position you can leverage during such negotiations.
We hope these seven considerations showed you just how prudent investing in the real estate market can actually be. No matter whether you are a newcomer who wants to avoid high-risk investments, or you are simply looking for a way to anchor your existing portfolio, hard assets like properties always make the most sensible solution.