Why should you invest in real estate? Well, investing in real estate for profit is one of the most popular methods for generating additional revenue in the US today. In fact, if you pay attention to the latest press, you have seen many reports of real estate investments that seem to be sweeping the nation.
When done carefully and intelligently, real estate can provide amazing benefits that can not be achieved through any other type of investment. Here are some examples of why investment in real estate can be such a powerful wealth generator.
- Real estate markets are slow to react Real estate, like everything else, has up and down, it is generally much slower to react than the stock market. For example, you do not get up in the morning and find that your real estate investment is worth ten or twenty percent less than yesterday.
2nd lever. You can borrow money to buy real estate, but generally you can not borrow money to buy shares. You can control a large dollar value of real estate with a small amount of your own money by using loans and mortgages. The stock market, by law, limits the amount of leverage effect margin that you can use to buy shares. There are no such boundaries with real estate.
- You can buy real estate for less than its market value. In many cases you can buy a property for as little as 60 to 70 percent of the market value. When you buy stocks, you may find a stock that is considered undervalued but it is usually hard to do it regularly and consistently.
- Real estate offers a huge amount of tax benefits through depreciation. Real estate has basically two values, the land and the buildings in the field. For example, if a property is valued at 250,000 and the countrys estimated value is 75,000, the building would be worth 175,000.
The government allows real estate investors to value the building in equal parts over its useful life, which is defined as 27.5 years. So, for example, based on the building value of 175,000 above, the annual depreciation value would amount to 6,633.63 175,000 divided by 27.5. This means that the investor for tax purposes could reduce his annual income by 6,633.63
Many think the term depreciation is confusing because it is not really a loss of money. I recommend that you check with a qualified tax seller for more information and how it benefits you.
- Real estate markets are isolated local markets. For example, when the stock market falls, it takes down almost everyone and everything involved in it. When home values fall into a city like New York, it does not generally affect property values in other cities such as Boston or Chicago. To protect you, you can get a geographically diversified portfolio of real estate investments to hedge these types of events.
- You investor can check the value. Another aspect of real estate investment is that, unlike any other investment, this investment is controlled by the investor. For example, as an investor, you can increase the value of your investment property by making any changes to the property, such as adding a garage or changing carpet etc. With shares or other investment, the investor can not do anything to increase the value of the investment.
- The effective market hypothesis EMH. When a market has prices that always fully reflect available information, it is called effective. For example, the stock market is most marked to be an effective market. When you call your broker to buy or sell a stock, you can be sure of one thing the price you bought or sold the stock for was really the correct price for it stored on that day and at that time. Why? Since the existing price of the stock already incorporates and reflects all relevant available information about the company, such as revenue and other measurement values.
With real estate, the market is very ineffective. Unlike the stock market, with real estate, the correct price detection mechanism is provided to each buyer and seller to calculate on their own. There is almost always uncertainty as to whether the price sold by the seller is too high or too low. In addition, there is usually little or no help from analysts and research agencies as in the management of shares in this regard. This inefficiency is the reason why real estate offers such a good investment opportunity to be smart and win But it requires experience and a sharp eye for good deals and good negotiating ability. This competence can be developed.