Real estate has long been a highly desirable industry favoring heavy-handed investments from wealthy entrepreneurs, private citizens, and commercial enterprises. The sheer fact that there’s a finite amount of property in the world means that, eventually (in theory) the price of property will rise, thereby benefitting whoever was intelligent enough to purchase it in the first place. Yet, what truly makes real estate a different, or more lucrative, or less risky, investment than, say, the stock market?
First and foremost, cash flow. Cash flow, cash flow, cash flow. So many people put money into rental properties simply because of the cash flow—aka the money left over after all the bills have been paid. With the surplus of cash, landlords have access to an ongoing monthly income that is largely self-sustained, meaning that said landlord doesn’t have to do much to receive it. Thus, they are being paid while largely spending their time building business and making additional investments.
Just as well, this cash flow is not only mostly self-sustained, but it’s also generally more stable and predictable than other sectors of the economy. Entrepreneurs undoubtedly face enough ups and downs when trying to establish a thriving business, and any less stress is a big win.
Put frankly, if I earn 100 grand through rental properties, and you earn 100 grand through your business, I get to keep more of the money. The simple fact is that the government encourages property ownership through tax incentives, and by owning rental properties, you are taking advantage of those tax incentives.
Your rental property is not subject to self-employment tax, and, if used properly, you can make take further advantage of exclusive tax benefits like depreciation and lower tax-rates which bolster long-term profits.
Generally speaking, as you pay off your loan the value of your property rises, which means you make money. Obviously, this is not foolproof. Recessions do occur. Market value does decrease (temporarily). Sometimes people buy right before a bubble bursts. Yet, with time, values do increase significantly. Even if they rise, rise, and then fall, they will rise again.
I’m not referring to ten years or even twenty years. I’m saying it might take thirty years or maybe more; but the value will go up and you will benefit from it so long as you are able to weather any fiscal storms that might pass through in the meantime.
Real estate is a phenomenal opportunity simply because there is nothing else like it. Like Franklin D. Roosevelt once said, “real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care…it is about the safest investment in the world.”