The impact of the coronavirus pandemic on the global economy has shown us the importance of having an investment that guarantees a good return. The pandemic made investing a riskier venture as many businesses have been struggling to stay afloat. With the outlook still uncertain, you might be asking yourself, “Is real estate a good investment?” In this article, we look at some of the top benefits that come with investing in real estate.
Why is Real Estate a Good Investment?
1. Stability
Should I invest in stocks or buy real estate? Well, one reason to consider getting into real estate is stability. Unlike stocks, real estate investments are historically more resilient to changes in the economy. Despite the current market slow down, home prices have been on an upward trend in most parts of the country. This makes real estate a safe bet for investors. On the other hand, we have seen a collapse in stock markets in the last couple of months which shows just how volatile they are.
Moreover, regardless of how bad the economy is, people still need a roof over their heads. When the economy takes a downturn, fewer people will be able to buy a home and will opt to rent. As a result, there will be a higher demand for rental properties and improved cash flow. This stability makes rental properties one of the most profitable real estate investments.
Related: Buying Stocks or Real Estate for Investment Purposes: The Better Option
2. Cash flow
While many things have changed due to the pandemic, the fundamental benefits of real estate investing will remain. If you are wondering “Is real estate a good investment?”, one key reason to consider it is the steady cash flow it can provide. Investing in rental properties can be a lucrative real estate investment strategy due to its potential to produce consistent cash flow. A good rental property can generate regular income and positive cash flow year-round. This means that you’ll be able to pay off your mortgage expenses and other recurring rental costs and still turn a profit.
One thing that makes rental properties one of the best cash flow investments is the ability to earn passive income. You can do this by hiring a property manager to handle the daily operations and maintenance work. With reliable monthly cash flow, it will be easier for you to build your portfolio. With a sizable portfolio, you can generate enough cash flow to finance your lifestyle and even retire. This is what makes rental properties attractive to real estate investors.
3. Tax Benefits
Another key benefit that makes real estate one of the best investments is the tax advantages. There are a number of unique tax deductions that real estate investors can take advantage of and save a lot of money. Real estate investors can often deduct maintenance, utilities, mortgage interest, insurance premiums, office space, property tax, depreciation, and travel costs associated with the property. When you add up all tax deductions, you’ll see that you can save a lot of money. This one huge advantage that real estate has over other types of investments.
4. Appreciation Potential
Another factor that provides insight to the question “Is real estate a good investment?” is real estate appreciation. The value of real estate assets will often increase over time. Apart from generating rental income, you can turn a profit when you decide to sell. The rental rate will also go up with time, allowing you generate higher cash flow. Therefore, real estate can serve as an effective hedge against inflation. However, you need to do thorough market research to identify markets with great potential for future real estate appreciation.
5. Leverage
If you are wondering how to get into real estate with little money, the answer is leverage. Property investment doesn’t have to tie up a lot of cash. You can put up about 20% on a property and get the bank to finance its purchase. You don’t have to cover the 100% of the purchase price yourself. Leverage basically allows a real estate investor to acquire an investment property that is worth more than the funds they have or acquire more properties.
As you pay down the mortgage and as the value of the property goes up, you build equity in the property. You can tap into this equity to make another real estate investment. The more investment properties you have in your portfolio the more your cash flow will be.
Moreover, mortgage rates are expected to remain low for the rest of the year. If you asking yourself “is real estate a good investment”, the current low mortgage rates should motivate you to be a real estate investor. A low interest rate means that would be able to ease your monthly returns. When using leverage, you want to calculate the potential cash on cash return to determine how profitable it is.
Related: Real Estate Investments and Leverage- All You NEED to Know
How to Find a Profitable Investment Property
You now have some insight into the question, “Is real estate a good investment?”. However, not all real estate investments will generate good returns. If you are wondering how to make money in real estate, the first and most important thing is to buy the right investment property. This requires a lot of research. Fortunately, through Mashvisor’s platform and tools, it’s possible for anyone to find a profitable rental property for sale in the US housing market in a matter of minutes. You can do so in the following simple steps:
1. Market Research
The first step in finding a profitable investment property for sale is to conduct market research. Location is one of the most crucial aspects of investing in rental properties. Even before you begin your investment property search, you need to identify an optimal location for investing. To find the best investments you have to look in the best locations. One easy way to find top cities for investing in the US is to look up city-level data on Mashvisor’s real estate blog.
Heatmap analysis simplifies the process of finding profitable properties
After choosing a city to invest in, you narrow down your search to the neighborhood level. With Mashvisor’s real estate heatmap, you can conduct a thorough neighborhood analysis based on performance metrics like median property price, rental income, cash on cash return, and Airbnb occupancy rate. For instance, you can use the Property Price filter to locate neighborhoods with cheap real estate (marked in red).
2. Property Search
The Property Finder helps investors find profitable investments
Mashvisor’s Property Finder helps you to find the most suitable investment properties for sale in any market in the US housing market based on your search criteria and preferences. You can even search in multiple cities at once. The tool supports the following filters:
- Property Type
- Optimal Rental Strategy
- Return on Investment
- Listing Price
- Market Availability
3. Investment Property Analysis
Before buying rental property, in-depth analysis is crucial. Mashvisor’s investment property calculator helps you identify the most profitable investment properties for sale using comparative data and predictive analytics. The calculator calculates a number of key real estate metrics including rental income, cash flow, cash on cash return, and occupancy rate. The calculator provides values for both Airbnb rental strategy and traditional rental strategy. This allows you to easily determine the optimal rental strategy.
The Bottom Line
With the ongoing pandemic, one common question among would-be investors is, “ Is real estate a good investment?” The truth is that, if done right, real estate investing is one of the best ways to invest your money, particularly in tough economic times like we are in now. If you want a more stable investment with consistent cash flow to add to your portfolio, you may want to buy a rental property.
However, it’s important that you learn how to invest in real estate before you get started. Before you buy property, thorough market analysis and investment property analysis are essential to ascertain its profitability potential. Real estate investing for beginners has never been easier than with Mashvisor as it provides all the necessary tools you need to find a profitable investment property for sale in the US housing market.
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.