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Why Should I Invest in Real Estate?

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Why Should I Invest in Real Estate? Empty Why Should I Invest in Real Estate?

Post  realtorvietnam Thu Oct 28, 2010 11:50 pm

Most of the 1990's, The Standard & Poors Index posted earning yields of 5% to 6% on average. At the same time, the dividend yields of the S & P were only around 2% or less. Since dividend paying stocks tend to be much less volatile, the gains on the appreciation side would not normally be a significant factor.

At the same time, bond yields taken as a composite, showed only around 5% returns. Better yields were riskier, while safer bonds returned lower yields.

During the same time period, real estate investors were realizing much more attractive returns due to the multiple income streams from real estate investment:

# Rental yield - This is the percentage yield from direct rental income, and can be calculated as either gross or net. Experienced investors prefer to calculate the Net Rental Yield (calculation detailed here), which takes the expenses, taxes and other costs into account, and divides by the property value/cost. It could be a negative cash flow, as it doesn't take mortgage payments into account. For this reason, many investors prefer to look at Cash-on-Cash rental yields. The example at the link shows a 6.4% example return on cash invested. Though the investor can purchase and manage for a yield on this single component that exceeds average stock or bond dividend yields, it is only one of the ways in which real estate returns on your investment.
# Appreciation - Rental properties normally appreciate in value with inflation. Increased value can mean sale and reinvestment in higher value properties, or provide an equity line of credit to use for other investments. This is the second, and a historically proven value component of real estate investment return.
# Inflation is Rent-Friendly - Rents usually increase with inflation, while mortgage payments on the property remain stable. This increases cash flow, with more rent income without increased expense for holding the property. When inflation is up, it can also mean more renters, as the affordability of homes can be negatively impacted by inflation. More renters increases demand, so rents can escalate.
# Leverage - Using leverage, while being careful to buy properties with good rental yields, provides greater returns. Using $100,000 to purchase three properties with down payments, instead of one for $100,000 cash, can greatly increase returns. Of course, all leverage involves risk, so the successful investor must understand how leverage impacts their real estate investments.
# Paying down the loan - Amortization, or paying down the loan, frees up more investment resources to increase leverage. Some investors use increased equity in one property to free up funds to invest in others.
# Property improvement for equity - Many investors intentionally purchase properties at a value because they lack some feature or could use some improvements in condition or amenities. They have calculated that the value of the improvements will exceed the cost, resulting in an immediate increase in equity. Get more information on ARV, or After Repair Value.

While stocks and bonds are inflation-sensitive, and they typically involve only value appreciation potential and low or non-existent dividend/interest returns, we see here that real estate provides multi-faceted investment returns.

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Post  lakota6418 Mon Dec 13, 2010 10:25 pm

Finding the right property isn't that hard. You just have to find the right agent with the right technology and know how to help your find your perfect home. One of the easiest ways to search is to sign up for our email update program. Homes that match your criteria will show up in your email box every morning like clockwork.
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Post  cherrysmith14 Wed Jul 13, 2011 12:15 am

Hello Friends...........

1.Save Investment option:It is a safer option compared to stock markets as the rates of real estate market are relatively stable and show appreciation at a steady rate. The value of real estate might drop due to market instability but in longer run, it’s always a profitable business.

2.A Start without Cash:For beginners in this field, the only investment is time which can be utilized to strike a good deal for numerous investors who are ready to invest any amount in order to get the right property.

3.Easy to do: You can easily earn lucrative profits via real estate investing if you are a keen learner, have little patience and can keep a smart watch on the market. You may even use online resources or attend seminars to learn more about the real estate business.


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Post  Jeff Mon Jul 18, 2011 12:40 pm

Real Estate Investment is a good option to go for! It always appreciate the value ahead. You can check it though. Not having much knowledge about stocks and all that. But you can have a great deal with the help of good agents, and can have a great returns too. Smile


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Post  carry18 Sun Aug 28, 2011 11:03 pm

Hello Friends.........

Real estate is the number one investment vehicle for creating millionaires. If this alone is not a good enough reason to become an investor, I do not know what is!



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Post  Felix07Richerd Mon Feb 06, 2012 12:43 am

Real Estate Investment Property via an open-ended investment companies (OEICs) and investment fund assets are systems, such as swimming pool investors 'funds' in a fund that invests as much as possible indirect investments in real estate.
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