Savvy Investors Know That Real Estate is King of Investment Mountain
Many people believe that to build wealth one must invest in the stock market. The underlying concept is straightforward enough: You purchase stock in a company and they in turn work to increase their profits, which increases the value of your stock. If you’re lucky, they may even send you a dividend, but it’s not likely. If they do, it won’t be much. For serious investors, what’s missing from this process is control. The truth is that those who invest in stocks are at the mercy of the companies they’ve invested in to generate profits and increase stock value.
For those who prefer a more active, hands-on approach, real estate has proven to be a lucrative alternative. Many are choosing investment properties with great cash flow with the help of an expert agent experienced in real estate for investment. Once they have acquired a property, these investors have control over a variety of elements affecting the size of their returns, including property condition, rent charged and tenant screening. These decisions have a direct impact on creating a steady stream of cash flow while building equity, both of which will work to build wealth over time.
But it’s not just this control that makes real estate as an investment so attractive. In fact, the numbers are on the side of real estate investment. When you look at the performance of stocks versus real estate, the stock market has proven to be much more volatile. If you had invested $100,000 in the stock market in in January 2000, your investment would only be worth $97,680 in June 20121. That same investment in real estate would be worth $135,670 according to median sales price figures from the National Association of Realtors2. That’s a 2.32 percent decrease for the stock market and a 35.7 percent increase for real estate. And, based on Census Bureau averages of rental pricing3 during that time, cash flow from a rental property would generate $93,954. When combined with the average appreciation over that time period, this investment’s returns would total $229,624—even after the worst housing crash in our generation. Any investor can see that a 129.62 percent increase is a more attractive proposition than a -2.32 percent loss.
Certainly, investment properties will have expenses associated with them, such as insurance and maintenance; however, working with a knowledgeable agent to find the right property and do the math ahead of time can help mitigate risk and help ensure cash flow. Partnering with a Certified Investor Agent Specialist (CIAS) is essential in identifying and negotiating your purchases to ensure a great investment from the outset.
Considering all the great deals in today’s market, the lower-than-ever interest rates, tax benefits, and proven stability over time, it’s easy to see that when compared to other asset classes, real estate is indeed King of Investment Mountain.
2National Association of Realtors
3U.S. Census Bureau