Why should you invest in Real Estate?
Why Should you invest in Real Estate?
“The last thing that I want to do is unclog a toilet in the middle of the night in a rental property!” That’s the first thing that people usually say when asked about investing in Real Estate. I feel their pain, I have gotten that exact phone call and a few other choice ones. Here’s why Real Estate Investing does payoff in the long run:
During most of the 1990s, The Standard & Poors Index posted earning yields of 5% to 6% on average. At the same time, the dividend yields of the S & P were only around 2% or less. During the same time period, real estate investors were realizing much more attractive returns with multiple income streams from real estate investment:
Appreciation - Rental properties normally appreciate in value with inflation. Increased value can lead to selling and reinvesting in higher value properties or serve as an equity line of credit to use for other investments—a historically proven component of real estate investment return.
Inflation is Rent-Friendly - Rents usually increase with inflation, while mortgage payments on the property remain stable. An increase in rent means increased cash flow. When inflation is up, it can also mean more renters, because homes become less affordable. More renters means more demand, so rents escalate.
Leverage- Using leverage, while being careful to buy properties with good rental yields, provides greater returns. Using $100,000 to purchase three properties with down payments, instead of one for $100,000 cash, can greatly increase returns.
Paying down the loan - Amortization, or paying down the loan, frees up more investment resources to increase leverage. Some investors use increased equity in one property to free up funds to invest in others.
What can you do today? Choose a rental property that cash flows the moment that you purchase it. Use the tenants’ rent to pay the mortgage while you build yourself a wonderful investment portfolio. Join the many savvy investors who recognize the value of today’s properties. Also choose a great Property Management Company so you don’t let the fear of midnight plumbing jobs keep you from this wonderful opportunity!