26 Aug Is Real Estate Investment Really Worth the Hype?
Real estate has been one of the strongest investment opportunities with an articulated probability of herding returns. This has fuelled a lot of demand for real estate, as many investors continuously explore the sector. In this article, we will be providing real insights to the benefit of this investment, its down side and answering the question, “Is real estate investment really worth the hype
The benefits of investing in real estate are numerous. With well-chosen assets, investors can enjoy predictable cash flow and excellent returns. One of the primary ways of investing in real estate is to become a landlord of a rental property but investing in the sector is not limited to that only, investors can also enjoy excellent returns through Real estate investment trusts (REITs), Rental Residences and Property flipping.
These listed ways of investing can expand and diversify one’s portfolio and help build wealth;
- In the case of Real estate investment trusts (REITs), this gives the investor, market exposure without the time and financial commitment of owning property; Shares of a REIT are purchased and then returns are gathered from an aligned percentage of the income generated by the assets.
- Rental Residences involves owning properties. This is a great opportunity for individuals who have do-it-yourself (D-I-Y) renovation skills and the patience to supervise tenants. However, this needs a sizable amount of funding to cover the void months as well as the upfront maintenance fees.
- And Property flipping, which requires more time and expensive methods as it offers the greatest potential for generating rewards. Being a successful flipper means being always ready for unforeseen complications, budget hikes, mistakes that take time to fix, extended remodelling timelines, and difficulties selling on the market.
While all these ways centre on different aspects of real estate, one thing they all share in common is that the sector is a great investment for many reasons. You can enjoy an excellent rate of returns from appreciations and hedge inflations. Here’s what you need to know about real estate benefits and why real estate is considered a good investment.
Cash flow is the net income from a real estate investment after mortgage payments and operating expenses have been made. A key benefit of real estate investing is its ability to generate cash flow.
Real estate investors make money through rental income, any profits generated by property-dependent business activity, and appreciation. Real estate values tend to increase over time, and with a good investment, you can turn a profit when it’s time to sell. Rents also tend to rise over time, which can lead to higher cash flow.
The inflation hedging capability of real estate stems from the positive relationship between GDP growth and the demand for real estate. As economies expand, the demand for real estate drives rents higher. This, in turn, translates into higher capital values. Therefore, real estate tends to maintain the buying power of capital by passing some of the inflationary pressure on to tenants and by incorporating some of the inflationary pressure in the form of capital appreciation.
Real Estate Leverage
Leverage is the use of various financial instruments or borrowed capital (e.g., debt) to increase an investment’s potential return. A 20% down payment on a mortgage, for example, gets you 100% of the house you want to buy—that’s leverage. Because real estate is a tangible asset and one that can serve as collateral, financing is readily available.
Despite the juicy benefit of the investment, Real estate is not exempted from the ups and downs that come with every investment opportunity. Although investing in real estate can be very beneficial, it is vital to be aware of the risks. Bad locations, poor cash flows, and high vacancies are among the main dangers. The real estate market’s unpredictability, unseen structural issues, and a lack of liquidity are additional dangers to take into account. But much as there are issues, there are also long-term solutions to those issues.
Real estate can be a fantastic method to create passive income and amass wealth for many investors. Investing in real estate has shown to be a great way to achieve a variety of financial objectives, including retirement, college savings, and financial independence. So yes, real estate investment is definitely worth the hype! And if you want to invest in quality real estate, Green Park Homes has all you need. But if you are more of a land speculator or want to build to your own taste, Alpha Mead has high-value site & serviced estates for you.