Real Estate Investing- A Viable Investment Strategy?

Many people have looked into real estate investing as a viable option to invest their money. While we believe that investing money is important, regardless of where it is being put to use, we thought we would analyze whether it is a viable option to grow wealth. If it is, then it may be a great way to further diversify your money. If not, you may be wasting hours and hours of work in addition to money on something that isn’t going to give you a long-term return.

Real estate investing is a different approach to investing than the stock market. Instead of buying individual stocks, you are acting in a position similar to a business owner. You are the sole person responsible for coming up with the money to invest as well as to manage the property. While you can certainly hire a property manager to lessen your time involvement, that comes with it’s costs.

Why Real Estate Investing is Attactive

People invest in real estate for different reasons. Some just want to avoid the stock market because of a illogical fear of it, while others are looking to acquire assets that generate wealth. While it will ultimately a matter of cash flow either way, it’s really a different way of looking at investments. Instead of trying to acquire as much money as possible, so you can slowly withdraw money as you need it, retirement planning using real estate emphasizes the cash flow. It looks at how much you need to live on and then looks to generate that much income from rent income.

It is attractive to different investors because of its security. People always need a place to live and always will. While other trends might come and go over the course of your lifetime, renting does not appear to be one of them. It’s here to stay.

The Other Benefits of Real Estate Investing

Besides the long-term security, real estate investing also offers many other benefits. Here are some of the most important ones:

Leverage – Unlike the stock market investing where you can only invest twice as much as the liquid assets that you have, real estate investing allows you to buy properties in higher multiples of your cash value. If you can get the financing, you can buy a rental property that is worth 10 or 20 times your down payment or initial investment. Then, if tenants can pay for the expenses, it means for a small amount of money, you own an asset that can increase in price. So, if you see a 4% increase in value, it’s not just a 4% increase on your down payment, but the value of the home. This is the idea of leverage.

Multiple Forms of Income – Real estate investing also has the benefit of being able to generate revenue in many ways. As I discussed when talking about leverage, you have the ability to increase your investment with the inflation of the property. But that’s not all. Once the mortgage is paid off, you can have a nice steady income from the rent prices.

Real estate investing is a different approach to investing money, but the important thing is to keep your money active. The last thing you want is your money sitting around not doing anything for you. If diversification is a concern for you, maybe you should consider real estate investments as there are many other benefits that we don’t have time to discuss.

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