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7 Reasons Why Real Estate is America's Sweetheart Investment

real estate Sep 06, 2019

The average investor in America is absolutely in love with real estate.  We know why we like real estate, but why does it seem that every John and Jane Doe want to get involved in it?  Why are there dozens of reality TV shows about investing in real estate?  Why are there hundreds of self-proclaimed real estate gurus out there?  What exactly makes real estate America’s favorite investment?


There are actually several very good reasons why real estate wins the investing game.  Here are our top seven:


Reason 7:  When compared to investing in the Stock Market, Real Estate seems to be a friendlier investment.  Despite the average returns on stocks of 8.6% per year over the past few decades, the returns on Real Estate were actually higher for a large portion of that time.  So long, in fact, that some younger investors couldn’t remember a time when real estate ever went down… until the crash, that is.  Now that we had a crash, those young investors seem to believe the worst is over and that Real Estate will go back to the state of consistent growth.  Also, most people consider the stock market to be very volatile and hard to navigate but real estate seems like a much more stable investment.  Despite the fact that Real Estate is illiquid in nature, Americans consider it to be a tangible asset that they can really relate to.  As we all know, everybody needs a home.  Stocks don’t feel nearly as tangible although there are much more liquid in nature.  You can sell a stock with the push of a button.  Not so with a house.  Go figure!


Reason 6:  Some investors don’t focus on real estate appreciates, only on the cash flow that it creates.  As long as the asset is making money, it really doesn’t matter what the value of the property is.  That only matters if you’re selling it, not when your holding.  To those investors, if you hold on to the asset long enough, it will pay for itself.   


Reason 5:  Tax policies and the low-interest rates favor home ownership as well as Real Estate Investors.  There are so many tax advantages as a landlord, that a good accountant can make a cash flowing property look like it’s hemoraging money.  Investors can write off losses and bad properties, while still differing taxes on a winner to a later time by doing a 1031 Exchange and putting all that money back into buying another property.  Investors can even do installment sales to lessen their tax liability further or use a charitable trust.  The tax benefits of Real Estate make any accountant swoon.


Reason 4:  Rental real estate is a considered to be a good retirement investment.  You can buy Real Estate inside your IRA and begin building your retirement nest egg with many tax free advantages, especially if it’s inside a Roth IRA.  Your Real Estate can not only build wealth in there but create cash flow.  Just be extremely careful to follow the guidelines of your IRA to the letter.  You cannot benefit from this Real Estate, nor can your children.  Meaning, you can’t buy a house in Hawaii with your IRA and then go vacation there.  You also can’t buy a condo in the city where your child attends college and rent it out to him or her.  IRAs can only benefit themselves.  There are arms length rules you must abide by or you’ll lose your IRA.  Click here to go right to the IRS’ publication about this.


Reason 3:  The prices of homes are attractive to investors.  Even a newbie investor knows that he will only need a small percentage down on his investment to buy a home.  The old saying, “It takes money to make money,” seems to be what shys new investors away from the stock market and other pricey investments.  Most feel that they will need a lot more money to invest and get the gains they require.  Although, most of the time, this might not be true.  There is, however, a lack of education and therefore those old beliefs scare people away.  There is so much hype around Real Estate that people can’t really tell when it’s up and when it’s down.  Media pushes its agenda and spoon feeds Americans the “good news” about housing prices still recovering.  However, in many regions, that is not the case.  Shout out to Chicago, here.  They are taking a beating but most don’t want to believe it can happen again or happen anywhere else but that just may be the case.


Reason 2:  It provides the opportunity to leverage your capital like no other investment.  Think about it.  Whatother investment can you purchase with a small percentage down, sometimes no money down, and yet still reap all the rewards of owning it as if you paid for it full and in cash?  Even with a mortgage, Real Estate Investors still get the full benefit of tax deductions and many other benefits.  You can’t do that with stocks.  Only recently have I heard of people buying gold and silver with credit but that is something new.  Nearly every other investment requires you to purchase it outright before reaping any benefits.


Reason 1:  You can invest in real estate with other people’s money.  Again, what other investment gives you this type of opportunity, unless you own a business that goes public but then you’re at the mercy of shareholders unless you own controlling stock.  Really, Real Estate is just so perfect at this.  You can buy a property, fix it up, and then refinance the property pulling all of your own cash out and using the banks cash instead.  If the value of the home has appreciated well enough, you might be able to pull even more out than you put in giving yourself a tax-free to reinvest somewhere else.  Let’s see your Cybercurrency do that.


The above reasons strongly persuade Americans to continue their love affair with Real Estate.  Investing in Real Estate is the number one option for Americans, a Bankrate.Com survey confirmed.  Recent cooling of the market, some plummets in the market, and huge speculations about another adjustment to come, yet nothing seems to affect America’s optimism towards Real Estate.  That same survey asked Americans about their long-term investments.  Here are the results:

28% Real Estate

23% Cash Investments

17%  Stocks

15% Gold and other Precious Metals

4% Bonds

A Gallup poll showed 34% of Americans choosing Real Estate as their preferred long-term investment compared to 19% in 2011.  Yes, Americans have short-term memories and apparently hold no grudges.  Although stocks perform four times better, Americans still love Real Estate.  The Melt-Up in the Stock Market just doesn’t give them that same warm and fuzzy feeling inside that Real Estate does.  I guess for now it’s baseball, hot dogs, apple pie, and Real Estate.





Michelle R Russell

© The Prosperity Process, LLC  

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