Opportunities to invest in real estate have grown quite impressively in the last few decades. Real estate is the land alongside any permanent improvements attached to the land, whether natural or man-made.
Real estate comes in 4 types. There is land, industrial, commercial real estate, and residential real estate. With this basic knowledge let’s get right into the article.
So what are the reasons why you should invest in real estate?
Real estate, land in this context appreciates over time because it is limited in supply. Therefore, as the population increases, so does the demand for land, driving its price up over time and making it a good investment plan.
However, there are some factors that drive up this appreciation in real estate and they include general inflation and zoning laws.
For example, if you buy a house with $20,000 down on a $100,000 house and it goes up 4% in a year, it is now worth $104,000. You’ve made $4,000 on a $20,000 investment.
When you convert these amounts to your national exchange rate you’ll see how quite impressive the turnout is.
Real estate values tend to increase over time, and with a good investment, you can turn a profit when it’s time to sell.
This particular point here is a big why for most real estate investors.
Real estate (houses) in this context can be improved to be worth more than its original value just by engaging in structural or cosmetic repairs.
This is a unique and very attractive advantage. Every 1,000 square feet added to a house boosts the sale price by more than 30 percent, according to the 2005 study for the National Association of Realtors.
A property’s value drops when you neglect maintenance and repairs. You don’t have to spend a whole lot on doing this.
ENABLES CASH FLOW
Real estate investors make money through rental income, any profits generated by property-dependent business activity, and appreciation.
However, cash flow is the net income from a real estate investment after operating expenses have been made. Rents also tend to rise over time, which can lead to higher cash flow.
You can maximize your cash flow by having long-term occupants or tenants. Cash flow can also be maximized by increasing rent and having preventive maintenance.
Leverage in real estate is using borrowed money to buy a property. When leveraging a property, you borrow funds from a lender who in most cases is the bank(of your choice) to be able to purchase an investment property instead of having to cover the entire price yourself. Being able to leverage your investment is one of the answers to why you should invest in real estate.
Also, real estate is a tangible asset and one that can serve as collateral. Leverage can increase your returns when the interest you’re paying on the loan is less than the rate of return on the investment.
On its own, real estate offers cash flow, loan leverage, equity building, and value appreciation.