Investing in land, residential housing, and commercial real estate is usually a solid asset in the portfolio of a discerning investor. There are a number of factors that make property or real estate attractive to investors. It has been a longtime traditional method of investment for centuries and investors usually have a strong belief in its potential over a period of time.
Investing in real property is seen as a low-risk investment. The traditional notion is that if a property’s title is held in an investor’s name, the risk factors are considerably lower. Also, property prices are much more stable when compared to stock market investments. The major risk factors for real estate investments are a sudden decline in a nation’s economy, natural disasters like fire and earthquakes, and unpredictable events such as civil unrest or war. However, some properties can be insured against these calamities, thus mitigating the risk factor to a great extent.
Unlike stocks, real estate investments do not require a regular financial review. The growth or fall in property prices is usually gradual over many years or decades, not sudden. This makes it easy for the investor to manage regular tracking of his or her current real estate investment value at any given time. However, if the investment property is rented out, property management including recordkeeping of income and expenses is required to prepare for capital gains taxes at the end of each calendar year. Other management responsibilities are also required.
Most older real estate investors and homeowners already know of the value that real estate contributes to their estates and overall wealth. For example, in some areas, a person who bought their home forty years ago and kept it until retirement can realize a significant profit of over ten to twenty times what they initially paid for the property. Since real property is such a great asset, it should be protected from loss by placing it inside a family trust. See your estate planning attorney to learn more about protecting real estate and other valuable assets.
Real estate offers other advantages to the investor. Property can be rented or leased with the rental income used to pay any mortgage payments. Investors can also use rental income to help supplement their investment portfolio with other new assets. There are also significant tax benefits in many states when owning real estate, especially in growing communities.