Why Real Estate?

What's so good about real estate? Aren't there other investments that do better? I would challenge that real estate is the best form of investing overall, followed closely by stock options. Why do I say this? There are several reasons. First of all, real estate is one of the few investments where you can leverage other people's money in order to increase your rate of return. It is not uncommon to see rates of return above 30%, which is very hard to duplicate using other forms of investments.

Real estate is very safe compared to other markets. For example, properties are not just going to disappear, which could happen to stocks. Sure, values may decline by substantial amounts, (A great example is the current real estate market.) but the properties themselves have not disappeared. Also, if your strategy in real estate is cash flow, then a down market is not a big deal. People will always need a place to live, so if everyone is selling their home, they are going to be looking for homes to rent. Often times, when a real estate market goes down, the price to rent goes up. An investor who carefully researches a property and buys it well under market value has a very high chance of succeeding, even in a down market like we are seeing now. Another observation is that despite what the media always seems to say, property does tend to go up in value over the long run. Overall, property is a very stable and secure way to invest.

Here is the last reason that I love real estate. Real estate lets you enjoy both capital gains as well as cashflow. With almost every other form of investing, you can only get either capital gains or cashflow. Let me illustrate: Suppose that an investor has owned an apartment complex for several years that has been generating substantial cash flows. Is there anything that the investor can do to benefit from appreciation without selling? Yes there is. The investor can refinance the property, which would let him pull out some money tax free, while still keeping the property and its cash flow.

Well there you have it. We have covered three reasons why I think real esate is an amazing investment. Be sure to check back for more thoughts and strategies on real esate investing!

Below is a short video with some of my thoughts about the current market. Enjoy.



Jonathan