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5 Reasons Why investors Love Real Estate

real estate investmentWith age comes maturity and the need to engage in pursuits that clear the road to the future. Smart players diversify their portfolio so that they can 1) reap the benefits of a well-spread investment plan and 2) withstand market fluctuations that erode a particular investment niche (shares or bonds or properties for example). There is a general consensus among investors that real estate is the most sought after niche for expansion of investment portfolio. I feel there are good reasons for believing the same.

1. Real estate looks true

It just seems truer than others. We hear about hundreds of people who have made millions in real estate. There is no denying the sense of familiarity attached to the game. Just think about it: we are talking about purchasing and selling homes, places that we live in, breathe in. Is it not the reason why people consider DIY home improvements an easy project despite evidence to the contrary?

2. Less volatile, gives more time to adjust

Growth cycles witness price escalations, sharp falls and long plateaus, and yet it is not hard to figure out that real estate is a far less volatile territory than the currency market or the stock market. I mean, even newbies feel good about the task at hand. A share or a currency dip can catch you unawares; they can go down rapidly in value in a matter of minutes. In real estate, on the other hand, shifts occur over weeks and months, giving you a fair amount of time to ruminate on your moves.

3. Uses negative gearing well

If you choose to negatively gear your property (for achieving the dream of capital growth), you can earn tax deductions on the expenses made. At the same time, you can also fetch tax rebates under the tab ‘depreciation’.

4. Uses the concept of equity beautifully

Property market is a domain where the concept of equity is beautifully used. Use of leverage for financing the property implies that it is the tenant who actually pays the mortgage for you, and in doing so, also reduces the total principal balance. Naturally, it all goes towards building up equity.

5. Reaps the benefit of perennial supply shortage

It is needless to say that our planet is not adding any further land. So it is safe to assume that with the kind of population growth we are witnessing, we will only be facing further space cramps. We will find relief in vertical expansion but overall the demand-supply equation will mean that properties will keep appreciating in value.