If you’re planning for retirement, your two options are either to keep piling money in a bank account somewhere or to invest your money. There are many investments that you can choose from and each will have its own pros and cons. With this in mind, real estate can be a very sensible investment. Real estate investments are not subject to the risks that face some other investments so you’ll be sure that your investment is relatively safe. But there is more to it than that.
The obvious danger with real estate is that you could buy at a time when market prices are insanely high which means you could pay more than what the property is worth. However, property values have been quite stable in recent times. If that’s not enough of an incentive for you, here are a few other reasons why you may want to invest in real estate and not simply let you money lie in a bank.
Cash Flow
If you invest in real estate such as apartment buildings, the tenants can ensure that you have a source of cash every month. This is akin to receiving a salary from your investment. If you purchased the property using a mortgage, you may not have to make the mortgage payments from your own pockets. This means your real estate purchase could in the long run pay for itself.
You can also use the cash from the property to cover the taxes and to also cover the maintenance costs of your real estate.
Appreciation
No matter how hard we try, the number of people on earth only keeps going up while the size of the land stays more or less the same. Although this is a generalized way of looking at it, what this simply means is that the value of land has always tended to go upwards due to increased demand. Although there may be temporary forces that could suddenly affect the curve, as soon as things stabilize, the prices will usually take on an upward trend.
This means that if you ever decide to let go of the property in some years, you’re likely to get paid more than you paid for the property yourself.
Self-Occupation
If you invest in something like a house, you can stay in the house permanently or just long enough that you can fix it up. This means that you may not have to pay rent to live somewhere else. You could be a live-in landlord if you own a building such as an apartment complex. This will give you a place to stay while renting out the other units.
Inflation Protection
If you’ve ever wondered why your dollar doesn’t buy as much as it once did, it all comes down to one word; inflation. Inflation is what causes the value of goods and services to rise. Inflation will keep your money from being what it could be. If the difference between the interest your money in the bank is accumulating and the rate of inflation is small, you may not realize much returns from your savings.
On the other hand, rents and property values are always in tandem with inflation rates. If inflation is on the rise, so are the rents and the property values. This ensures that you have an investment that is protected from the negatives of inflation.
Getting the best from Real Estate Investments
A real estate investment can be a so-so investment or it can be an excellent investment. The difference is brought on by factors such as buying when the market is stable and knowing early enough how factors such as property taxes could eat into your benefits. Carefully looking into such factors is what can make a real estate investment an excellent choice.
Author
James Helliwell