Why real estate ranks #1 in best long term investments
Despite rising inflation and higher mortgage rates, real estate remains #1 among the best long term investments. Purchasing a real estate property is not only a wealth-building strategy; it’s also a physical investment that provides security for investors. Whether you are a new or seasoned investor, these eight reasons why real estate surpasses stocks, bonds, and mutual funds as the best long-term investment may surprise you.
Real estate properties make the best long term investments
According to the Gallup poll, interest in real estate investing dipped after experiencing a record high in 2022, yet currently aligns with market trends between 2016 and 2020. Outside of precious metals like gold, real estate continues to outperform other proven long-term investments and has investors hedging their bets.
Here are 8 reasons why real estate is the best long term investment:
- Tangible asset: Unlike stocks or bonds, which may be subject to market volatility, real estate is a tangible asset that is visible, touchable, and directly manageable.
- Appreciation potential: The value of real estate properties usually appreciates, especially in growing or high-demand areas. The potential for significant ROI (return on investment) makes it an appealing option for long-term investors.
- Rental income: Real estate can generate rental income through leasing to businesses, renting residents, or booking short-term stay guests. Rental income provides a steady cash flow and can help cover mortgage payments and other expenses associated with the property.
- Diversification: Adding real estate to an investment portfolio creates diversification, which can reduce risk and overall volatility in the long run. Diversification is essential to building a well-rounded investment portfolio and developing a solid investment strategy.
- Inflation hedge: Real estate has historically been considered a hedge against inflation. As the general price level of goods and services rises, real estate values and rental income may also increase, helping to preserve the investor’s purchasing power.
- Tax advantages: Real estate investors benefit from various tax advantages such as depreciation deductions, mortgage interest deductions, and 1031 exchanges (in the United States), which can lower their overall tax liability.
- Increasing population and urbanization: The global population continues to explode, and urban areas are expanding. This trend can boost the demand for already scarce housing and commercial spaces, leading to potential opportunities for real estate investors.
- Limited supply: Limited available properties for sale combined with a lack of land development trigger higher demand while simultaneously driving up property values.
Despite these potential pros, it’s best to consider the risks associated with real estate investment. Market fluctuations with property, management challenges, economic downturns, and changes in local regulations can create problems for new and experienced investors. As with any investment, careful research and consideration of one’s financial goals and risk tolerance is necessary. Regardless of the type of investment, consult with a trusted financial advisor or real estate professional to make informed investment decisions.
Our wide range of real estate knowledge, personal touch, and proven track record within Detroit real estate give TeamLBR Real Estate a distinct edge over similar realty firms. Let Team LBR spearhead your next property acquisition. We assist with every step of the process from property assessment down to property management. Contact us today to discuss your investment goals and needs.
Sources: ‘Real estate’s lead as best investment shrinks; Gold rises’ (https://news.gallup.com/poll/505592/real-estate-lead-best-investment-shrinks-gold-rises.aspx)