When it comes to investing, I am surprised by how easily people overlook real estate as a positive investment opportunity. So often we hear people say they are buying a home to invest in their family’s future, yet when it comes to assessing positive cash flow opportunities, real estate misses the list.
I fully support buying your own home, but that investment doesn’t pay off until you place it back on the market. Investment properties create a positive cash flow right off the bat be it through rental income or doing a quick flip and relist.
Here are a few reasons why having real estate investments in your portfolio can pay off.
Positive Cash Flow with Proper Planning
There are a lot of different ways to find a positive cash flow with real estate investments, but if you are new to it be sure to educate yourself on what to look for. If you’re in the early phases of investing, James Lawrence from Real Estate Investar has a step by step breakdown for ensuring positive cash flow. In short though, if you do your research and consider models like the cash-zone formula to make an educated purchase you can see great payoffs.
Real Estate Investing Doesn’t Require You to be a Landlord
Don’t assume that investing in real estate comes along with all the strings of managing a property and tenants. There are a lot of ways to invest in properties while still avoiding the title of landlord.
Real estate investment trusts are a great opportunity to diversify your portfolio without the same risk. As explained on Making Sense of Cents, “Real estate investment trusts are a special type of corporation established by law in 1960. These companies own real estate properties and do not have to pay corporate income taxes as long as they pay out at least 90% of income to investors.” In turn, you own a small piece of a variety of properties. Because of the income payout regulation real estate investment trusts are also a great way to turn a profit without the hassle that comes along with managing a property.
Real Estate will Always Be In Demand
The real estate market may fluctuate in the amount of payoff, but so long as people and businesses need shelter, real estate will be in demand. By investing in real estate, you bet that next year or ten years from now, people will still want to live in a house.
There is a finite amount of real estate because there is a finite amount of land. Sure, real estate will follow an ebb and flow that follows the basic trends of supply and demand, but as populations rise so does the need for real estate. As The Balance puts it, “Though you might be able to create more identical units, such as condos or townhomes, in a given space, the land itself is unique and cannot be duplicated to accommodate a short supply.”
As Investopedia reminds you, “When your price point is reached, you would sell the property just as you would a stock that has appreciated. This may not be a practical approach for your primary residence, depending on your lifestyle, but it is exactly what many real estate investors do when they purchase properties, renovate them and sell them.” While it may be easier to get attached to a property than a stock, it’s important to remember that each serves the same purpose. If you view your properties for what they are, investments, you are more likely to share in the perks. Properties are a business, and if you treat them as such, it will pay off.