The merits of Real Estate as an alternative investment option
Research showed that people around the world invest in a lot of options. Examples of these options include mutual fund, investment fund, bonds, wine, gold, real estate, art etc. The list is endless. Each of the investment option has its unique characteristic and description. As a result of the different characteristics, various advantages and disadvantages are also associated with the investment option. A popular adage suggests that one should not put all their eggs in one basket. This means that also in investment decision making, no matter how one understands and appreciate a particular investment option, it is not wise to put all their wealth in that single particular investment option. A wise investor will seek advice on how to store their wealth depending with their specific individual or business case. This article aims to justify the importance of real estate to ordinary investors as a good investment option.
Real estate provides long term financial security. Investing in real estate provide investors with long term financial security. Financial security refers to the peace of mind one feels when they are not worried about the income being enough to cover one’s expenses. It also means that one has enough money saved to cover emergencies and any other future financial goals. When one owns real estate in any form, they are guaranteed of being financially secure as they will be receiving income. In other words, one will not have to work, their investment will be working for them.
Real estate also possess tax benefits. Owning real estate has some unique financial advantages for example, homeowners can deduct their mortgage interest, mortgage insurance premiums, and property taxes from ordinary income. Investment firms can also pay less tax as a result of including expenses like depreciation in their list of property expenses. Depending with the region one is in for example in Botswana, ordinary Batswana do not pay income tax to BURS for the rentals they receive from their residential properties that are leased.
Real estate is an effective hedge against inflation. Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time. It is often expressed as a percentage, inflation indicates a decrease in the purchasing power of a nation’s currency. This means that if the economy is to experience unsustainable inflation, one will still maintain the value of their wealth if they place investments in real estate.
Real estate appreciates in value over a period of time. One of the main factors of production which is land cannot be supplied or manufactured. This means that the growth in population is leading to many people chasing the little available land. The principles of supply state that when many people are competing for the same product which cannot be manufactured, the overall price will rise as consumers will be undercutting each other. Real estate will appreciate in value over a period of time. In some states, there are individuals that earn a living from holding land for speculation purposes hence proving its ability to increase in value over time.
Unlike other investment options like shares in a public company, real estate provide its owners with the ability of being the own decision maker. Investors like to have authority and influence over their investments. Decision making is the thought process of selecting a logical choice from the available options. When trying to make a good decision, a person must weigh the positives and negatives of each option, and consider all the alternatives. Investors of real estate are presented with this option hence can easily shape the future of their investment.
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