9 reasons why you should choose a real estate investment

Although there are many options to invest, real estate investment is one of the favorites. There are at least 9 reasons why we should invest in properties and not in other types of investments:

1. The power of “Leverage”

To invest in our properties we have the option of not using 100% of our money, but rather using other people’s money (OPM). One of the most common sources is money from bank loans. Depending on the country in which we are, we can normally get a loan from the banks that ranges from 70% to 95%. In this case, we only need to spend the down payment of 5% to 30% of the price of the property. This also means that the leverage is about 3.3 to 20 times.

2. Relatively low risk

In general, investing in property is not like investing in the stock market, where prices in one day can go up and down significantly. Only in certain situations where the economy was doing poorly, real estate investments may be slightly affected. When compared to other types of investment, such as starting a business, saving money on deposit, or investing in stocks, real estate investing has lower risk than those investments. Comparing risk to income potential, the property is relatively low risk with good rental income and capital gains potential.

3. Two sources of income: rent and capital gains

Real estate investment offers a combination of rental income and capital gains. Investing in properties will not only give us a positive cash flow, but also the possible capital gains depend on the increase in the price of the property.

4. Full control to increase property value

If you own a property, you are in full control of how the value of the property will increase. There are many ways that can be done to increase property value, ranging from very simple things like painting the property. Other ways are buying some accessories or cosmetics and renovations. These activities are very important especially when we want to rent or sell a property. Some people do minor renovations to increase the value of the property so that the owners can sell for much higher prices.

5. Safe and secure long-term investment

Property prices usually won’t fluctuate as much. In general, it can take some time for property prices to change over time. This is different from the stock market, for example, where prices can change dramatically overnight.

6. Inflation protection

Unlike savings or deposits where the interest is typically much lower than the rate of inflation, property prices typically follow at least the rate of inflation. In this case, investing in property is still a better option to protect them from inflation.

7. A good vehicle to achieve financial freedom

Using rental income to generate positive cash flow, it is possible to achieve financial independence after a few years depending on each person’s level of success in real estate investing. For example, if a person has an income of $3,000 per month, that person can be financially free by earning $3,000 per month in cash from 5 properties with each property generating a positive cash flow of $600 per property per month. Consider it a tiny house or a townhouse, rent of $600 would be very reasonable and quite conservative in this regard.

8. It can reduce the tax burden

Founding the business and buying property using the business name can save taxes. The rental property can be considered as income tax and will generally be applied only after the deduction of all expenses charged. Buying a property on behalf of the company will be more profitable than buying on behalf of individuals.

9. Get rich through property

Real estate investing can make people truly rich. The key to property wealth is through capital gains. For example, someone is investing in an apartment priced at $500K with a down payment of $50K. Monthly income from the property sufficient to pay the monthly bank fees, so it is automatically financed with a monthly income from the bank fee. After 20 years, the property was paid off in full and the price appreciated to, say, $1 million (this is conservative, because property prices in general will triple or even quadruple in 20 years). In this case, the net investment gain ($1M – $50K) = $950K. If this person has 3 apartments and a total net profit would be almost $3 million over 20 years. This guy has really become a millionaire with real estate investing.