What is Real Estate Investment?
A real estate is an asset form with limited liquidity relative to other notable investments. Real estate investment, in particular, has been confirmed – time and time again – that it could serve as a wealth-building vehicle for savvy traders.
Being a real estate investor isn’t usually glamorous however it is one of the pleasant means to build wealth over the long-haul, particularly for the business minded. Real estate plays an essential role in the Canada economy. The residential real estate offers to the house for families.
Real estate investment is often the greatest source of wealth and financial savings for most families. Commercial real estate, which includes apartment buildings, create jobs and spaces for retail, offices, and production. Real estate business and investment is a source of revenue for millions of people.
Real estate investment and the economic system.
Construction is the most effective part of real estate, it is really measured by GDP. Real estate also influences many other areas of economic well-being that aren’t measured. For instance, a decline in real estate revenues will ultimately result in a decline in real estate costs. That lowers the value of all homes, whether investors are actively selling or not. It reduces the number of home equity loans available to investors. They will cut back on consumer spending. Nearly 70% of the Canada economic system is primarily based on private or personal consumption.
The only pleasant news about lower home prices is that it lessens the possibilities of inflation. No one is aware of, however, whether a real estate crash will occur in the nearest future, but savvy investors build contingencies into their investment plan for sudden economic change.
Advantages of Investing in Real Estate over other investments (Stock)
The biggest advantage of real estate investment over the stocks is that the real estate can safely be leveraged to increase your return on investment. For many people, investing in real estate is a very comfortable thing. They grew up with the idea of, “someday owning a home.” That is a familiar concept compared to buying stocks and bonds.
When you own a piece of real estate property, you have something tangible, something you can look at, take your friends to see and have the satisfaction of knowing that you own that piece of land or that building. It is very important psychologically to the investor. By contrast, when people buy stocks, the intention is to hold them over a long period of time, investing the dividends along the way. Over the long haul, stocks can provide an excellent return, but along the way, they can experience some extreme fluctuations.
The problem is that most investors are too emotional to just sit tight, so they do not execute their plan and they fail to realize their maximum benefits. Not unlike real estate, participating in the stock market has become synonymous with high return on investments for those that really know how to trade.
However, if you venture into stock trading, you will be at the mercy of a relatively risky market. Real estate is the opposite regarding some aspects. Net earnings in real estate are reflective of your very own moves. You are in control of your own money. Any cash earned or lost is an instantaneous result of what you do. Other advantages include the followings:
Hedge against Inflation
Inflation is defined as a continuous and sustained increase in the general level of prices for goods and offerings. In other words, it causes every Dollar you own to purchase a smaller percentage of goods or services over time. Stocks, for instance, require extra money to purchase with the increase of inflation.
Basically, inflation prevents your money from going as far as it would have. Real estate, however, serves as a hedge against inflation. Unlike nearly every other forms of investment, real estate reacts proportionately to inflation. As inflation rate rises, so too do rents and home.
Many investors invest in rental properties clearly due to the cash flow – the extra cash that is left after all the expenses had been paid. The cash flow can offer continuous, monthly earning that is mostly passive, permitting you to spend your time building a business, traveling or reinvesting more in real estate project. Cash flow from real estate is stable and far more predictable than most other investments (Stock, Bond, e.t.c). That’s remarkable for entrepreneurs enduring the ups and downs of start-up life
High Non-Current Asset value
Unlike stocks and, to a point, bonds, an investment in real estate is backed by a high level of brick and mortar. This helps to lessen the principal-agent disagreements or the extent to which the interest of the investor is depending on the integrity and competence of managers and the receivables. Even real estate investment trusts (REITs), which are listed real estate securities, do have regulations that mandate a minimum percentage (%) of earnings be paid out as dividends.
Of the various benefits of real estate investment, its key advantage abounds in the fact that real estate investment is stable and possesses the capability to absorb inflation. It’s far one of the investments that hardly loses its worth, and even where that is the case, real estate investment usually has the potential to bounce back within a tremendously short time. It is worthy of note however that the economic meltdown will not last forever, as the market will soon regain its lost value.
With real estate prices down and interest rates low, it makes sense to buy your office or home instead of renewing the lease. The economic relationship of rent versus your very own property has changed dramatically in the recent years.