Why Invest in Real Estate?

At the risk of sounding rather corny, real estate investment is a gift that keeps on giving. When compared to other types of investments, such as stocks, bonds, automobiles, and such, the security that real estate offers is unparalleled. As far as profitability, real estate outperforms any other investment in the long haul. It also offers an investor the opportunity to pay off the investment over a period of time via a variety of available financing strategies.

Generally, a buyer only needs to put twenty percent of the total purchase price as a down payment, and at times even less money is necessary. The rest of the money can be financed. After you factor in the other costs associated within the overall transaction (closing costs, maintenance expenses, property taxes), an investment is real estate is still considerably more of a secure business venture. These costs are relatively small when compared to the overall value of the property.

Stocks, bonds, and other commodities have to be purchased outright. Therefore, a buyer is not given the option of supplementing his/her funds through financing options. These types of investments also run the risk of being subject to greater fluctuations in price due to the ever changing market economy.

There is no doubt about it that the real estate market is booming right now. According to the National Association of Realtors, there has never been a huge price drop on home sales since they began collecting information on existing home sales. Foreclosures and bank owned properties are at an all time high. Many skeptics tend to associate real estate investments as a gamble. Instead of viewing it as a potential risk or loss, take into account that the benefits outweigh the risk factors on an overall basis.

Consider the many upswings when compared to other types of investments, such as the previously mentioned stocks and bonds. With real estate, an investor has the opportunity to benefit from a leveraged return on the equity of the property. He/she can tap into the equity of the home or property by borrowing against it. This money can be used for home improvements, paying off student loans, reducing credit card debt, or purchasing a new care. With this increase in borrowing power, the possibilities are endless.

Appreciation of value of propertyis another added bonus. Real estate appreciates in a couple of different ways. Supply and demand is always a factor. Market conditions typically create an upward pressure on housing prices. Another way to increase the value of a property is through home improvements and renovations. If properly maintained and the neighborhood is not deteriorating substantially, real estate will continue to appreciate in value. Even if a home was to go into foreclosure, it still has some value.

Investing in this market can be quite a lucrative endeavor in a variety of areas. Owning a home goes hand in hand with a certain social status. It is a positive component both on a personal and a financial level. Because it is such a highly leveraged asset, it generates high yielding returns and creates greater wealth. Through the incorporation of an amortization loan, where the balance of the loan is reduced with each payment, part of each payment is applied toward the interest, and the rest of the amount goes to the principal, an investor increases his/her wealth with each payment made. It is almost a forced savings program, where one can build up equity over the course of the loan. This amortization schedule when coupled with the steady price appreciation on the initial money put down increase profitability. The tax benefits and government subsidies for income generating assets such as real estate are additional perks available to an investor.

True, as with any investment opportunity, there is a level of risk involved, but real estate offers an investor the greater benefits. In addition to giving a buyer more leverage, real estate also offers more of a sense of security. The performance of real estate, in regard to price appreciation is not directly affected by the performance of the stocks and bonds markets. Variations in home prices are generally lower that those associated with stocks and bonds. Overall, the downswings in the real estate market are not as pronounced as they might be with other investments.

With so much to offer and the wealth of opportunities available in the market right now, why not take the plunge and invest. Buying and selling homes and properties has become a much easier and faster process than it has been in the past. Because the market for real estate has become more liquid and less costly, there are more opportunities than ever for the public at large. The falling mortgage rates and the real estate boom in the current economy should be taken advantage of. Investors that have previously been intimidated by this industry should realize that it is neither complicated nor expensive. It is all about having the right attitude.