An investment is an asset that is purchased with the hope that it will generate income or will appreciate in the future. The idea behind investment is to create wealth in order to fund various financial goals you may have in your life.
As an investor, you need to consider a number of factors before committing yourself to an investment plan, be it the purchase of bonds, stocks or real estate. The first and foremost thing to consider is the return on investment which will be provided by that instrument along with the risk associated with it.
When done the right way, real estate can prove to be a great investment in many ways. You can enjoy an excellent rate of return, amazing tax benefits and leverage real estate to build your wealth. Here are the top reasons why making investments in real estate is an excellent choice for protecting and growing your wealth.
Capital Growth/Higher Return On Investment
Returns are of primary importance for every investor. A comparison of historical data on returns between real estate and stock market shows that returns are phenomenally higher for real estate, making it far more suitable and attractive for investors. The biggest advantage of real estate remains to be able to buy at a lower rate than the market, adding value to the property and getting higher returns in the bargain. This provides a regular income stream that is significantly higher than the typical stock dividend yields.
Increased Cash flow
Perhaps everyone’s favorite benefit, cash flow is essentially profit. Cash flow is the amount that is left over after you collect the rent and pay your mortgage, taxes, insurance and any repairs. One of the biggest benefits of income-producing real estate investment is that leases generally secure the assets. When you have a steady flow of cash in succession, the rewards of this investment bring on financial rewards for a long time.
Inflation-Proof
Inflation, which is the sustained increase in the general level of prices for goods and services, deprecates the value of your money over time. The interest you earn by parking your money in a savings account usually cannot cope with inflation. You need to put it in an investment where your money grows to retain its value. In times like this, investment in real estate can be more satisfying as compared to other options such as stocks. Real estate serves as a hedge against inflation. Unlike almost every other form of investment, real estate reacts proportionately to inflation. Just as the value of the property rises with inflation, the amount which tenants pay in rent also increases over time. This enables the income generated by an investment property to keep pace with the general rise in prices across the economy.
Tangible Asset
Real estate is something you can see, feel and utilize. While stocks have been reduced to mere ticker symbols and numbers, real estate investment gives you physical possession of the asset in return for your money. Real estate is one of the three pillars for survival, the other two being food and shelter.
Tax benefits
A lot of people take up loans while investing in real estate. Hence loans often find a place in tax rebates on the principal amount as well as tax exemptions under various sections of the Income Tax Act. A wise investor will always look for investment options that will save money and if it comes with tax benefits, then it’s even better.
Long-Term Financial Security
Stock markets can be extremely volatile and unpredictable. While the highs can be exhilarating, the lows can be really devastating. Fluctuations in the market have the potential to wipe out your capital base completely, which makes it an unreliable investment instrument. Real estate, on the other hand, is comparatively much more stable. The benefits of investing in real estate provide investors with long-term financial security as it is secured by a physical asset and is an overwhelmingly stable investment. In the vast majority of cases, an investment property will retain its value and appreciate over time. Since people will always need a place to live, real estate can be a safe way to invest your hard-earned money in something that’s always in demand. It's no surprise, then, that real estate is a popular investment today.
Easy Access to Loans against property
Owning a property secures you in more ways than one. If you ever find yourself in need of a huge amount of money for business or personal reasons, you can opt for a loan without selling or renting out your property. This property will be kept on mortgage and the loan amount will vary around 40-70 percent of the property’s market value and has a lower lending rate when compared to other loans. This ensures that you have cash on hand when needed, while still retaining the ownership of your property.
Apart from the above factors, latest government policies like RERA Act, Affordable Housing Scheme, and GST in Real Estate are helping ease out the hassles associated with real estate investment. An investment in real estate is not only a safe financial investment, it is also an investment that can provide years of fun, happiness and priceless memories that will last a lifetime.