I don't know about you, but real estate is the King of Investments. Andrew Carnegie set the ball rolling over two centuries ago confidently saying that ninety percent of the world’s millionaires invested in real estate.
Today, things haven’t changed so much. Sure, cryptocurrency and digital services have ushered in a new wave. And, honestly, are in a league of their own. But, real estate investment remains one of the fastest and safest ways to attain and maintain wealth, with little or no skill. And so I'll let you in on why the smartest investors specialize or have real estate in their investment portfolio.
7 Reasons Why Real Estate is The King of Investments
Here are seven reasons real estate is the King of Investments.
No Constant Heartaches
Some high-risk investments put a toll on a fragile heart. And you hardly know what factors influence their price fluctuations.
A good example are stocks. You don't have any control over price fluctuations, and you can lose all your money overnight.
Enter real estate. You can invest in residential properties and know exactly where your income is coming from and what's causing delay if any.
No headache or sleepless nights about dips week in, week out.
Makes You Untouchable
Real estate has high tangible asset value. This means that unless we experience another property armageddon or something cataclysmic, your investment can't dip to zero.
During the 2008 real estate crash that devastated homeowners and investors, homes still have some value. No matter how miserable it was. Moreso, home prices skyrocketed during and after the COVID-19 pandemic.
Meanwhile, you could lose thousands of dollars in a matter of minutes with one mistake in stocks or crypto investments. And that's a well-known caveat.
With real estate, though, your property can fetch you money (rent) for decades.
The Patient Dog Still Eats The Fattest Bone
The proverbial saying that a patient dog eats the fattest bone has gone out of fashion in recent times. In fact, some people would call you a goof-off.
When you hold a property in the housing market, its value never loses value. The only way you'll lose money in real estate is if you sell at the wrong time.
For example, a single-family home in Salt Lake City, Utah, sold for an average of $400,000 in 2018. Fast forward to 2021 —just four years later — that same property could sell for $600,000 or more. That would be 200% ROI, even if it were only a residential house. Commercializing it into an Airbnb, no doubt will give you a higher yield.
And it's the same routine in other states and around the world for ages. That deserves some respect.
We can argue that holding Bitcoin and Ethereum paid off handsomely after about a decade's wait. However, we can't yet say the same about smaller cryptocurrencies.
Offers a Plethora of Investment of Options
It's one thing to opt for a safe investment, and it's another to diversify. But real estate offers both.
On the one hand, you can add real estate to your investment portfolio investments to reduce sleepless nights. Say you invest half of your money in gold or Apple shares. You can rest easy knowing the remaining half is secure in real estate, free of aggressive fluctuations.
On the other hand, there are many ways to invest within the industry. Listed below are five ways to invest in real estate:
- Flipping houses
- Becoming a landlord of a rental property
- Buying real estate investment trusts (REITs)
- Joint real estate investment groups (REIGs)
Anyone interested in investing can choose which way fits their budget, style, or time commitment. It's similar to how you can be a day trader or buy-and-hold investor in crypto, but you have more options with real estate.
Insane Tax Benefits
Real estate trading enjoys generous tax benefits. And you don't even have to be involved in investments. For example, individuals can have $250,000 ($500,000 for married couples) shaved off the capital gains tax from selling a home they've lived in for at least two years.
But investors have more tax-reducing opportunities. If you've seen flippers hustle to offload properties towards the end of the year, it's most likely to cash in on a depreciation deduction.
Further, real estate investors can also defer capital gain taxes using a 1031 exchange. Essentially, you can hold off paying the tax till you're ready, as long you reinvest in the same market.
So if you just sold a $400,000 single-family unit, you must be buying another one for that price or higher to enjoy the benefit.
Remember, you still get actual deductions on insurance, depreciation and your running expenses of a rental property.
You can't say this about the majority of investments.
Protects Against Inflation
When you invest in real estate, your capital is protected by what's called an inflation hedge. In short, it means that your capital is protected against the decreasing purchasing power of a currency.
For instance, a retired landlord can increase rent whenever the market changes. This way, he not only maintains cash flow but can still live off his income.
If you've heard your finance coaches go berserk about saving money in the bank, this is why.
Go Bigger With Leverage
I've saved the best for the last, sealing why I believe real estate is the King of Investments.
To get my point, you should hear it from one of the titans in the game. Dottie Herman, a Realtor® with over $3 billion in sales earnings, says,
"Real estate is a bankable asset, so you can always leverage it."
That's right, the banks consider real estate valuable and since they can always foreclose it if you don't pay back your loan.
Dottie continues, "It also doesn't tie up a lot of cash. You can put down as little as 10% and use banks' money to grow your investment."
To be clear, this means you can acquire a $1million property and only pay $100,000 out-of-pocket.
Mrs. Herman caps off, saying, "with such low interest rates, that's like free money."
It's with benefits like this that the wealthy continually amass assets and multiply income.