The question most investors have asked themselves: Is real estate a good investment?
Real Estate Investing: Your Best Investment
There’s no doubt that real estate is a great investing option. It’s a great source of income, a real estate property can rise in value, and it’s a smart way to build wealth and plan for retirement. Plus, now is one of the best times in history to be investing in real estate. The endeavor, as any other type of investment, comes with challenges. So, we’re here to answer the questions: “Is real estate a good investment?: Why or why not?”
Related: Why Real Estate Investing Is One of the Best Ways to Make Money
Is Real Estate a Good Investment: It’s a Great One but Why?
1. Regular and Positive Income
Real estate investing provides a continuous source of income through rental income, buying low and selling high, fixing and flipping, etc. And what’s great about investment properties is that as soon as you buy one and start renting it out, you begin to receive rental income. There’s also an extra perk of real estate investing: passive income, or a regular income that you make with little effort/work. Of course, there is no such thing as zero work in return for income. Quite contrary to popular belief, real estate passive income can be quite difficult to attain, especially if you run your own real estate business. Still, real estate gives you options like investing with partners, using professional property managers, investing out of state, all of which are means to make money passively in real estate.
Related: 6 Strategies for Buying an Investment Property Low and Selling It High
2. Appreciation
Usually, in the short term, the benefit of real estate investing is positive cash flow. In the long term, a real estate investor enjoys appreciation. Real estate appreciation is the increase of the value of an investment property over a specific period of time. The current trend in the US real estate market is that property prices are continuing to rise, which means that your rental property will definitely appreciate in value. And even if you don’t see a significant change in a year or two, remember that it’s all about the long term when it comes to real estate appreciation.
3. It’s a “Hedge Against Inflation”
You always hear this phrase when discussing real estate. For a real estate investor, it essentially means that as inflation forces take their effect, you can increase your rent accordingly to offset the rise in prices. This is because property prices and rents go hand in hand with inflation. So why is real estate a good investment? Because you don’t experience such perks when investing in other types of assets including and similar to stocks.
4. You Are Your Own Boss
Why is real estate a good investment in this sense? If you’re the kind of person who doesn’t like to work for someone, real estate may just be the perfect career path for you. You are the maker of the decisions, you have more flexible hours where you set your own schedule, you choose the location of your investment(s), and you get to create a name for yourself. Sometimes, you may find yourself driven by external factors such as consumer trends, the economy, migration, etc., but that essentially takes place in any type of business.
Is Real Estate a Good Investment?: Why Not?
1. Income Gaps
While real estate investments are a great source of income, you may encounter income gaps. Income gaps occur in real estate when you are faced with irregularities with property occupancy. This could be caused by irregular tenants or seasonality for Airbnb investment properties, among other reasons. There are several ways to improve your rental property occupancy including long term planning, marketing your property, and selecting the right tenants. Make sure to read our 7 tips to achieve a high Airbnb occupancy rate to avoid income gaps.
2. You Need to Spend Money to Make Money
What many real estate investors don’t realize is that if you want to make money in real estate, you need to spend money. You need to spend money on things like rental renovation, maintenance and upkeep, replacement of materials (specifically in the case of Airbnb), and marketing. These efforts will help you in bringing in more income. There are multiple ways in which you can make money with the money you already have, but it’s always easier if you have more money to spend.
3. It Can Be a Full Time Job Even When It’s Part Time
While you can invest in real estate part time, it tends to be a full time job. Real estate investing is time consuming. Consider processes like screening tenants, showing a prospect tenant around the rental property, researching the latest real estate market trends, and analyzing consumer habits… you get the point. You may find yourself overwhelmed with the complexity of tasks you thought to be simple, and even asking yourself “Is real estate a good investment, or am I wasting my time?” So, make sure that you can commit the necessary time and energy when you finally choose real estate as an investment option, and that you make it worthwhile.
Related: How to Become a Real Estate Investor: Going From Part-Time to Full-Time
So In the End, Is Real Estate a Good Investment?
If we could answer “is real estate a good investment?” with a simple yes or no, we’d definitely say YES. But there are a few things you need to mind especially if you are a first time investor. So, while it does come with a few challenges (and who are we kidding, what doesn’t?), real estate is definitely worth it!
Related: 14 Common Mistakes of a First Time Real Estate Investor and How to Prevent Them
Once you are convinced of the positive answer to the question: “Is real estate a good investment?”, make sure to search Mashvisor for the best investment properties in town with all major numbers related to them.