If you have money to invest, and are ready to invest into something (anything) that might make you money, than you should consider how real estate investing might make you money. At the very least, consider what sets real estate investment apart from other alternative investment options.
Foremost, real estate investing allows more heavily leverage than other forms of investment alternatives. Despite the fact that equity requirements may require 20% or more or your money, the reality is that you can also control the asset with little or no equity down payment with a real estate investment. This, of course, is in stark contrast with stock investments which usually require a lot more equity from an investor. Plus, if the value of a stock drops, and you purchased those stocks on margin from a brokerage firm, you could face unanticipated margin calls to add additional equity.
For example, if you purchase a $300,000 rental property and are able to finance, say, 70% of it, than with just an investment of $90,000 you can use $210,000 of other people’s money (i.e., the bank/s money) to make money on your real estate investment. Moreover, the rents that your tenants pay you each month virtually make your loan payment for you. So you also get to use the tenant’s money not only to satisfy your loan (which is other people’s money), but add to your income stream as well.
Then, there is the control you get with investment real estate. Because you own and control the asset, you become king. Think about it. You decide how much you want to make and how much you should spend. If you drive by the property and don’t like the landscaping, you can change it. If the color of the buildings doesn’t suit you, you can paint the buildings. In other words, if you are not satisfied with anything associated with your property, you can change it because you are the CEO of your very own real estate investing company.
Along these same lines, you get pride of ownership by owning real property because you can touch and feel it; not to mention, gaze at it whenever you pass by. I’m not stock-bashing; there have been massive accumulations of wealth on Wall Street. But pointing at a ticker tape is far less fun than driving the family and friends by an apartment or commercial building and being able to say, “I own that building.”
Another benefit of real estate investing is the tendency for individual investment properties to be unique. Their size, condition, age, zoning, and sites all contribute to this individuality and uniqueness. For example, the value of your rental property investment is more influenced by the local markets than they are by the national markets. What happens to the rental market in Detroit, for instance, does not really influence the rental property you might own in Salem, Oregon.
Of course, there is a minor downside with real estate investments not commonly found in some other alternative choices. So let’s be fair. Rental properties can be management intensive. In fact, having a solid management plan is a necessity for any direct equity owner of rental property, whereas it would not require any management expertise to own less-than-controlling shares in Google.
Yes, it sounds Pollyannaish. But the reality about real estate investing is that it can benefit you in the ways I discussed if you do your homework and crunch the numbers before you make your purchase. I would never imply that every real estate investment is guaranteed to become a money-maker. I am merely suggesting that if you research the market carefully, understand what numbers to look for, and remain patient not to invest until you locate the rental property that appears profitable, that you can (and probably will) find it.