A catchphrase in the investment world is “invest what you can afford to lose.” This sends caution to investors. Some might be too hasty in making big investments without properly studying the field. Truly, the type of investment you should be making will depend on the budget you are willing to shell out.
Another factor is how much you know about the industry you are betting your money on. And finally, how far you are willing to go for potential gains.
A rule of thumb is that investments with high potential gains also come with high risks. An example is cryptocurrencies. Cryptocurrencies such as Bitcoin have a high potential for returns. However, it is also highly volatile. It means that the prices can be high this minute and then crash the next. It would take a nerve of steel and a ton of studying to invest in cryptocurrencies and endure the highs and lows.
The stock market is not as volatile as cryptocurrencies. However, it is not without volatility-related risks. The risks depend on the type of stock you invest in. Volatility may make your stomach churn unless your goal for your stock portfolio is long-term.
With that, what kind of investment will let your money grow while you just sit and relax? The answer might be none. But investing in real estate can be less mentally and emotionally taxing than the other two.
Property investment is an excellent tool for wealth building. Just look at the list of wealthy people around the world. That should tell you why owning an apartment or two is a great long-term plan. One of the first steps you should take is to get in touch with real estate experts. Make sure to consult an agent with a real estate license to ensure you are in safe hands.
Here are the reasons you should consider investing in real estate if you are on the conservative side of investing.
Real estate has a high-value appreciation
As long as there are people on Earth, they will need a roof over their heads. Remember that the worth of a product depends on the value it adds to people’s life. Housing is a basic need. People need a place to conduct their business.
This means that the value of houses and building complexes will forever be there. If anything, the demand for it even increases. Historical accounts support this claim. Some cities that slowly developed into commercial hotspots saw a rise in the demand for real estate. If you happened to own a property in one of these cities, you would have earned a great return on investment.
This value appreciation is natural. However, this can be forced. How? Another way to earn in real estate is through house-flipping. You find a property in poor shape. Replace the windows and doors. Paint it new. Add some technology. Finally, price it higher than your capital.
Real estate investing beats inflation
The U.S. Federal Reserve has an inflation target of 2 percent. Unfortunately, in the last 17 years, they have not succeeded meeting this target. This means that people in America suffer more than a two-percent inflation rate every year.
A two-percent inflation rate can significantly reduce the buying power of your money. The hard-earned money you saved in the bank last year can only buy so much this year.
A great strategy to combat this is by investing your money in real estate properties. A property that only maintained its price already beat inflation.
Of course, not all properties earn value or maintain it. You also have to consider the amount of money it takes to maintain a property. Taxes also add up to that. If you choose a property in hotspot cities, the value appreciation can still outweigh these expenses. Be wise about selecting properties to invest in.
Real estate is an excellent source of passive income
If wealth-building has long been your goal, then you know the value of passive income. You must be able to make money with minimal effort. Real estate allows for a great passive income venture. Cities are mostly where the in-demand jobs are. Unfortunately, the land is limited. There is a low chance that more housing complexes will be built.
If you own an apartment in a great location, you can rent it out. Most people will be willing to rent an apartment close to their job— that or spending precious hours on commute every day. This is where the potential of renting properties comes in as a passive income.
All these pros to real estate investing are not assured. You are still required to make good decisions. You can still lose money if you don’t invest in quality and potential. Do proper research before taking out all your savings in the bank.