Sometimes when you hear about real estate and see the guys and ladies involved in real estate, you are often left wondering what the benefits or do i rather say the advantages of Real Estate Business is. At one time i found myself asking “What really are the different advantages of Real Estate Investment especially in the States.
On this article i am going to shed some light on the various advantages of real estate investment. As a matter of fact i will list a total of 6 Advantages Of Real Estate. The reasons why you have to invest in real estate.
1. Real Estate Has The highest Return On Investment.
I am going to explain this on this segmant, so take a seat and read on.
For real estate investors, the return on investment is usually very high. The high returns are never affected by taxes and levied on your income as an investor. The truth is that as an investor, you’ll still have enough, more than enough for yourself even after tax deductions.
2. Demand for Real Estate Is Often Very High
As the law of demand has it all spelt, we all know with an increased demand comes an increase in price and sometimes scarcity as a result of several other factors.
Based on this, when population of a particular region increases, there comes a sudden decrease in the number of usable lands available. This is one of the major reason why a plot of land which formerly sold for a few millions would suddenly increase to over 45%. This is often the reason for a hike in real estate prices. Now who would ever want to stay or sleep on the streets or under the trees? No body right? because everybody need a roof over his/her head, it then means real estate is a service and an investment that would always be demanded for no matter what and at what time of the year.
3.You Have Lesser Risks To Worry About
Recently, there were so many ponzi schemes that sweeped the hell out of people’s pockets. Now thats unlike real estate investment. I know there is the likelihood of you loosing in real estate investments but the cases are rare unlike with other investments where frauds are higher. Now in real estate investments, if you’re serious and determined to make it huge, you’re surely gonna get there. Real estate investments are often less risky because its all about location population density and market behavior and several other factors. Aside from the factors above, Mortgage interests rates are usualy stable, you’ll also get to enjoy the natural Appreciation which is only common with landed properties. These and many more are just reason enough for you to want to invest in real estate.
4. All You Need is Some Cash
Research has shown that an initial deposit of $8,000 – $15,000 could be used to procure a real estate property while the remaining amount can be taken on holding the property as security. This is what you call high ratio financing isn’t it?
Just incase you do not have an understanding of all i am trying to say, let me make it simpler for you.
Supposing, you buy a condo worth $200,000, then you have to just pay the initial capital amount say 10% of $200,000. The remaining amount (which is 90%) can be financed, against your condo. It means that in a High Ratio financing, the ratio between the debt (here in the example it is 90% Mortgage) and the equity (here in the example it is 10% down payment) is very high. It is also important to calculate high ratio mortgage insurance with the help of Canada Mortgage and Housing Corporation (CMHC). If needed, you can also purchase the condo on 100% mortgage price.
5. Real Estate Appreciation
An appreciation is an average increase in the property value over original capital investment, taking place over a period. There are some neglected real estate properties that have an appreciation below the average mark, whereas, some of the properties located in maintained geographical areas, showing high demand, have an above average appreciation. In such centrally located and high demand areas, the average appreciation can reach up to 25% in a year. I will discuss appreciation in the chapter on real estate cycles. For now, for general understanding, appreciation is what goes up.
6. Low Inflation
Inflation is the rise in the prices of the products, commodities and services, or putting it another way, it is the decrease in your capacity to buy or hire the services. Supposing, a commodity was worth $10 a decade back, will now cost $ 100 as the result of inflation. For people who have fixed salaries feel the real brunt of the dollar, as the inflation rises. In Canada, the inflation rate varies and it varies every year. There was a time when Canada had a double-digit, but it was controlled to single digit, after the regulation of policy.
If we analyze closely, the land appreciation value for the residential real estate is 4% to 5% higher than inflation rate. Therefore, when you invest in real estate, then you are paying mortgage debts in high dollar value. Now as you are getting more, salary to pay less amount than the amount that you had paid in the original mortgage.