The year 2022 sure has been one rollercoaster. From the Russia-Ukraine war to inflation, the market has witnessed it all. The turbulent market climate this year is prompting investors to rethink how to structure their portfolios from just stocks. Given the resilience of these core markets and their capacity to pass on growing input prices to renters, real estate investments have recently appeared on investors’ radars.
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But, what is real estate investment?
Real estate investment is the use of real estate holdings as an investment vehicle to generate profit through a variety of means. It might be as easy as owning real estate, earning rental income, and selling the asset at a greater price owing to appreciation.
If done correctly, real estate investing may build generational wealth and beat the stock market. There are four basic methods to profit from real estate ownership. Rentals, appreciation, auxiliary investment income, and dividends from real estate investment trust (REIT) shares are examples of these.
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But why is real estate investment (and not stocks) many investors’ #1 choice?
- The majority of people are reconsidering real estate investments since they need less risk than equities. We can’t deny that stocks may make more wealth in the long term, but consumers understand that it needs more risk than investing in real estate investment buildings. That is why we discover that folks with high earnings are more inclined to take risks—risk has the least impact on them. Stocks are rewarding, but they are also hazardous. Cash is secure, but it produces no profit. Real estate investing is a good compromise; it is low risk with the potential for huge profits.
- Another advantage that investors like about real estate investment is that it is simpler to grasp than stocks. Stocks need a thorough grasp of how they operate. Real estate investing follows suit. The difference between the two techniques, however, is that learning how to discover, manage, and deal with a real estate investment property is far easier than comprehending how to invest in stocks. Individuals discover that it takes less time and effort.
- Inflation-Protection: One of the great advantages of real estate investment is that it shields your money from inflation. This asset class has intrinsic value, delivers consistent dividends, and is an excellent inflation hedge. Real estate can keep up with inflation since it is a need in everyday life. People will always want to live somewhere, and many businesses will demand a physical location. Everyone uses real estate, regardless of the status of the economy or the markets. And, while returns may decline, the overall (real estate) market will be more stable, with a reasonably quick recovery when conditions improve. Real estate, like commodities, tends to climb even faster in an inflationary environment. Hard assets automatically hedge since you are maintaining an asset that rises or appreciates (at) the same rate as inflation (against inflation).
- Time is directly related to value: The value of the real estate increases over time as money rises in various savings plans. Similarly, rents will constantly grow over time. Statistics suggest that unlike the massacre in financial markets, real estate values tend to return even after the most turbulent periods. Real estate, because it is tangible, provides greater investment control and may be leveraged to profit from a variety of income sources while enjoying capital growth. Home equity normally grows at a rate of 3.5 to 3.8 percent each year.
- You control: Every tangible real estate investment you make elevates you to the position of CEO. As CEO, you have the authority to make changes, decrease costs (refinance your mortgage now that interest rates have returned to historic lows), boost rents, locate better tenants, and advertise accordingly. If you are the type of person who loves to be in command, you will probably choose real estate over stocks. Just be cautious about believing you know too much for your good. Of course, you are still subject to the economic cycle, but you have far more discretion in making wealth-maximizing decisions. When you buy stock in a public or private corporation, you are a minority investor who trusts management. Managers occasionally perpetrate fraud or blast their company to smithereens through rash purchases. Nobody is more concerned with your investment than you are.
- Real estate volatility is less: Volatility in the world’s financial markets is not a hidden occurrence. It may happen at any time, as it is today, making equities trading dangerous. Your home’s worth may be plummeting and you’d have no idea because there is no daily ticker sign. Real estate investment, on the other hand, is less dangerous since it does not require specialized expertise and is not as volatile as the stock market. It will also most likely produce superior long-term returns. During the March 2020 stock market crash, real estate outperformed significantly. Money moved away from equities and into more tangible, less volatile assets that generated income. As of November 2020, real estate prices in the United States were still rising.
- Real estate is less susceptible to external influences: Real estate is a local business. If you made a wise option to buy in a prosperous location, you will be better protected from the national or worldwide economies. The fact that Spain is exploding is unlikely to alter the rent you may charge. For instance, Brexit lowered mortgage rates by encouraging foreign investors to buy secure US Treasury bonds.
- Tax advantages: Tax benefits are another significant advantage of real estate investing. This can assist individuals in balancing their income and lowering their overall taxes. Mortgage interest, insurance, maintenance and repair charges, and even property depreciation are all tax deductible. Long-term investments in real estate typically result in reduced tax rates.
We are confident that you are thinking about investing in real estate now that you are aware of the benefits. Real estate is the best long-term investment when all of these criteria are addressed. Assetmonk is a platform for high-yielding real estate investing. It’s also a website that acts as a go-between for NRI real estate investments. It provides high-quality real estate assets at reasonable prices. It liberates NRIs from the wasteful and time-consuming process of searching for property in India.