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Why Real Estate Is A Good Investment Vehicle

By Edited Nov 13, 2013 0 0

Investing in real estate

The right kind of investment for the wise investor

There are many ways to invest your hard-earned money and make it grow by itself through interest income, but none of them possesses the distinct earning capability of real estate investment that has made it one of the most popular choices of investors. Many financial institutions, as you probably know, invest heavily in real estate because they know that real money can be found here.

You know that banks provide you with 3 to 7 percent in exchange for the use of your money in the form of deposits like your savings and time deposit accounts. But, did you know that they earn more than 10 to 20 percent in real estate investments? Not many people probably know this.

The thing that makes real estate as a good investment vehicle is that it offers a combination of benefits that cannot be found on other investments. One good example is equity income (equity build-up or principal reduction). When you have a house on mortgage, the payment that you make each month helps in the reduction of your principal loan, thereby reducing your mortgage payable. When you sell the house at a later time, you owe less on the mortgage, but you decide on the selling price of house. You gain income by leveraging on your capacity to sell the house at a price more than the total amount you pay for the mortgage loan and interests.

The Internal Revenue Service offers tax shelters to some real estate investments. As much as you will benefit on the spendable income feature of this kind of good investment vehicle, you can also avail of its benefits tax-free. The IRS may allow you, the investor, to write off your tax payable against real estate income when you owe your real estate investment, as this produces what they call "paper loss."

Unlike money, which depreciates in value over time, real estate properties appreciate in value. Why does this happen? It's because, statistically, the government owns half of the land. This makes the land inaccessible for general use by the public. As the population grows, people will try to find more land to settle in. Because of this, competition arises. As competition for real estate grows, prices increase also. This is one feature of the real estate that makes it a good investment vehicle.

In other investments, only a handful of people will make decisions with regards to your investments. The authority on where and how to put your investments resides on the board of directors, for example. However, in real estate you get almost full control of your investments. If you purchase properties for a particular amount, you have the control on how to dispose of it –whether to offer it for rent or lease, or choose to sell it at a higher value than the purchase price of the property. Perhaps, these are some basic features why real estate is a good investment vehicle. However, there are still other benefits out there that can be derived from real estate investing. A much deeper study is just what is needed to know them all.


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