Surprisingly enough, most people do not realize that returns on real estate investments have kept pace with the stock market for the past 100 years or so and have, in fact, outperformed the stock market 2:1 in the first two decades of the 21st century. This information derived from the FTSE NAREIT U.S. Real Estate Index Series flies in the face of mistaken perceptions held by many investors.
It may be that hesitancy to dive into real estate investing comes from the false assumption that real estate requires a large amount of capital, or that being a landlord and/or house flipper is just too much work for someone more interested in passive income. If you want to buy stocks or bonds, you just call a broker or hop online yourself with a minimum investment. What too many people do not know is that you can invest in quality real estate assets without ever moving from your couch. Online investment platforms now team investors with pre-vetted properties for as little as $5,000. IMBY recently altered the landscape entirely by opening the playing field to all. With IMBY, as little as $1 will get you in the game.
Benefits of Investing in Real Estate
A revolution is taking place in the world of real estate investing. Here are the top six reasons why you need to start playing now or risk getting left behind.
1. Portfolio Diversification
Stocks and bonds may be doing well now, but any 6th grader knows that has not always been the case. Whether you are saving for retirement or some other long-term goals, it’s important to not place all your eggs in one nest. Adding shares of real estate ownership to your equities portfolio will do the trick. And the additional advantage of real estate investing through a digital marketplace is that it allows you to spread your funds across more than one property – by buying shares vs. an entire property on your own.
2. Tax Benefits
All homeowners understand the many tax benefits of homeownership – mortgage loan interest deductions, depreciation, maintenance & repair write-offs, deferred capital gains, low capital gains rates, etc. Real estate investment allows you to hold onto more of your regular income by taking advantage of these built-in tax breaks that favour property owners and investors. The tax breaks are most beneficial to those who hold onto a property for five years or longer.
3. Mailbox Money
Life is short and it seems that there is never enough time or money to experience all the adventure this world has to offer. Passive income derived from real estate investing is one form of “mailbox money” which can provide you with the time and the financial means to cross off a few of your bucket list items while you are still able to enjoy them.
4. The Joys of Equity and Appreciation
There is nothing quite like the feeling of watching property appreciate in value as the mortgage is paid down. This is called equity building. The beauty of equity is that it allows property owners to leverage money to invest in more properties and so on and so on. The statistics do not lie. Historically, real estate delivers enhanced returns with reduced risk (as compared to equities).
5. The Opportunity to Invest in Your Own Community
ROI, cap rates, NOI and cash flow are all key considerations in evaluating a potential investment property, but today’s investors are also interested in responsible investing that will benefit the community as a whole as well as their own bank account. Nowadays, many young investors, fund managers and real estate portfolio managers are taking a long, hard look at the assets they direct money toward – to ensure the investment is something all involved will be proud of. A real estate platform such as IMBY allows investors to purchase shares of property in their own backyard.
6. Real Estate is a Proven Wealth Builder
As Mark Twain famously said, “Buy land, they’re not making it anymore.” It was true in the 1800s when Twain said it and it is true now. A 2016 survey of 400 billionaires on a list by Forbes 400 revealed that real estate is the third most common route for billionaires to amass wealth. Technology is No. 2. And the No. 1 asset class on the road to the billionaire rung on the wealth ladder – “investments” – includes shared ownership in real estate assets. We are not all going to end up running in billionaire circles, but real estate is clearly a fairly good bet for those of us looking to provide for a comfortable future.
There are dozens of additional reasons why you should consider making real estate investment a part of your personal portfolio. If you are nervous, think about minimizing your risk by getting started through a crowdfunded marketplace such as IMBY.