Without a second thought, we are forced to give you some of the top 15 reasons why real estate is the best investment in 2023 for you. Real estate is arguably the oldest investment and the best. Historically, those who own real estate, and control lands and properties, were the wealthiest members of society. And this hasn’t changed in the present community.
15 Reasons Why Real Estate is the Best Investment
Real estate is a game changer in the investment world. Here are 15 reasons why real estate is the best investment and why you need to get into it.
1. Lifelong Passive Income
One of the significant reasons why real estate is the best investment is that it offers you a lifelong passive income. This is a major criterion for growing sustainable wealth.
Warren Buffet says, “if you don’t look for ways to make money while you sleep, you will work for money until you die.” Investing in real estate is one of the most reliable ways of building a sustainable lifelong passive income.
You can build homes and business shops and collect rent as long as you leave. You can even lease lands for companies and get paid without doing anything. It is the best retirement plan.
2. Most Reliable Store of value
Historically, the real estate market has exceeded other forms of investment as a store of value and wealth. It retains its value from years to years and decades to decades, making it one of the best investments. Currently, two-thirds of global net worth is stored in real estate.
Additionally, it is one of the safest stores of value. There are other stores of value, such as stocks, bonds, cryptocurrencies, and so on, but real estate has proven to be the safest. Real estate hardly depreciates, and even if it does, it is for a short period before bouncing back. Unlike fiat currencies like the US dollar, inflation does not have a significant impact on the value of the real estate.
3. Its Transferable to kids
Another reason why real estate is the best investment is that it offers trans-generational wealth. It can be passed down from families to their heirs without complex documentation processes.
For instance, the richest families in Florence in 1427 are still the richest families in Florence currently. By diversifying your fortune, you can easily grow wealth on inherited real estate.
4. Tax Benefits
Regardless of the country you reside, the government usually favors real estate investors over small business owners in terms of taxation. Real Estate investors are called developers because they provide houses for the population and increase the value of the land. So they are seen to be important in the country.
Also, rental property tax deductions help lower taxable income. Forms of rental property tax deductions include
- Advertising and marketing
- Property management
- Loan origination fees
- Mortgage interest payments
- Insurance payments
- Homeowner association fee
- Repairs and maintenance
5. Appreciate Naturally
Real estate is the only investment that appreciates naturally. The population is constantly growing, businesses are emerging daily, and these buildings need land and building to work in. More population means more homes for people to live in.
Home Guides stated that the average home appreciates by 3.5% to 3.8% per year (on a global scale). Also, central real estate appreciates an average of 6% per year. Furthermore, it doubles in value after every decade or so.
6. Forced Appreciation
Forced appreciation refers to increasing the value of your property through direct investments and efforts into the property. Forced appreciation was what birthed the house flipping market concept.
This is when you find a house in poor shape o devalued and invest in it by remodeling or renovating it and selling it at a higher price. However, this is for those that want to be active in the real estate market.
7. Tangible Asset
Unlike some investments like cryptocurrency and stocks, real estate is a tangible asset. You can see It, and it cannot be stolen, hacked, or snitched away from you as long as it is fully documented.
Traditional investors prefer tangible assets with consistent rewards to other high-risk investment options, which are imaginary, like stocks, ETFs, and cryptocurrencies.
8. Exciting Market Cycles
Real estate has exciting market cycles. Why? This seems strange. The exciting part here is that real estate investors buy more homes and lands when the prices are down and sell when the market is restored.
Similar to the stock market, the real estate market experience market cycles. However, this is for that who want to be fully involved in the work directly or indirectly.
9. Flexible Purchase Payment Structure
Most people have stated that investment in real estate is complex because of the high costs of land and buildings. However, this is not a problem, and you can go through an agency with a flexible payment structure to acquire a land or house.
10. Easy Funding Access
One of the things real estate enjoys above other investments is access to funding. In developed counties, banks and other investment homes are willing to give your credit facilities to invest in real estate, compared to other investments.
11. Easily insurable
You can insure your land and building anywhere in the world. Several insurance companies are offering good insurance coverage and deals,
There aren’t many protocols for documenting fixed assets due to their tangibility than digital investments. Below are some of the reasons why you must ensure your real estate:
- Protection From Property Damage in case of natural or handmade uncertainties
- Protection From Lawsuits – If your land is located at a hotspot, you will get people running to sue you without any tangible reason.
Real estate goes beyond residential and commercial buildings; it is way more than that. The beauty of this investment is that you can diversify it. Here are some common ways of diversifying real estate:
- Residential homes
- Apartment complexes
- Short-term rentals – like Airbnb
- Commercial shops and stores
- Commercial complexes – like a shopping mall
- Agricultural land
Although they are all real estate, they have different price points and ways of operation, and some aspects are more lucrative than others.
13. Moderately Easy to Liquidate
Another major reason real estate is the best investment is that you have access to cash whenever you want it. Although it is not easy to liquate as stocks or crypto, it is fair. It takes an average person between 60 to 90 days to sell a house. Although they are always buyers, it takes a short period to close the deals effectively.
14. Offers Protection from Inflation
As many laments about the raising value of goods and decreasing value of the US dollar, real estate investors aren’t complaining that much. Real estate is one of the best ways to ride above inflation. Instead of being negatively affected, the value of your properties appreciates together with the inflation. This is why real estate is the best investment.
15. Flexibility and Freedom
One of the reasons real estate is the best investment is because it offers you a level of freedom that most careers cannot offer you. As a real estate investor, you have time freedom, financial freedom, and flexibility to diversify and choose your investment strategy and gradually build wealth.
Disadvantages of Investing in Real Estate
Despite the positive cons and reasons for investing in real estate, it still has some setbacks. It is essential you know them, as they will help you make informed decisions on matters relating to real estate investments.
Some of the disadvantages of investing in real estate include:
1. Real Estate investment is a long time investment
If you are looking for an investment that will yield quick returns, then real estate is not it. Returns from real estate investments accrue over an extended period. So you should be ready to commit to a long-term goal if you are into real estate because prices do not go high immediately. It takes time to make significant gains from your properties and lands. Also, depending on the aspect of real estate you are into, you might be requested to manage the properties to keep them in good shape.
2. Real Estate can be influenced by rent control regulation
If you are into residential buildings, there is a possibility that the government can impose rent controls which limit your ability to raise your rent above certain limits, thereby limiting the returns from your investment.
3. Real Estate requires maintenance
If you are into commercial and residential homes, there are times when something unexpected may happen that require repairs, such as a leaky roof or failed water heater.
Also, you must carry out renovations on the building regularly to keep them on par with the current standard to maintain or increase the value. So, this requires you to spend more money.
4. Real Estate has high transaction costs
Several transaction costs are incurred in the process of buying and selling properties. These costs include title insurance, commission fee, loan origination fees, and closing costs. You can only offset these costs by holding to the properties for an extended period so that they can appreciate to a significant degree where you can make substantial gains.
5. Real Estate Income Varies
Real estate is not static. There are times that it varies. There are times when only a particular type of property is in demand, and the rest declines in value. They can be affected by technological changes, such as an increase in the demand for smart homes.
Also, changes can occur in tax regulations and controls. Also, they can be a shift of interest from one area to another that might affect the value of properties. For example, if there is a high emigration of people from the area in which your property is situated, it might significantly affect the value of the property. This can translate to a loss in investment. Most times, these changes are not predictable – they just happen, such as in the case of a natural disaster or tax regulation.
All these reasons are why real estate is the best investment and why you should consider going into it. I will advise you to visit real estate websites and check for the prices of properties in your area to know how much you can make if you begin investing within your locality.