Real estate practice and business varies and thrives at different levels in different economies. In some economy, it is just beginning and operates as the agrarian stage, while some have reached the take off stage but despite the different stages of economic operations, they all tend to possess a similar universal appeal to its investors.
Here are six universal reasons you should invest in real estate despite the different economic situations prevalent.
- Powerful and Stable
The last few unstable economic years taught investors they must find assets that are both powerful and stable and property fits the bill.
By powerful, it means that investments that act as a hedge against inflation and have the capacity to grow at wealth producing rates of growth through leveraging.
By stability, it means investments that grow in value steadily and surely, without major fluctuations in value.
- It operates as an imperfect market:
As opposed to shares where all shares in the same company are sold at the same price and, in general, all the players in the market have similar knowledge; the property market is imperfect. This means one can use his/her knowledge and contacts as well as negotiation expertise to buy a property considerably below or above market price.
In the share market this type of knowledge would be considered insider trading and illegal.
- It is a store of wealth
All over the world today, one of the topmost ratings of wealth is with the real estate. The rich and powerful in our societies are being measured by the expanse of the real estate they possess. It is easier to convert liquid cash to any asset but when the asset is real estate, it commands respect to the owner.
- Fund Leverage
Property allows us to use other people’s money to leverage our funds and purchase larger investments. Borrowing to invest in property also means you get greater access one of the oldest and most powerful tricks in the financial book.
You can borrow more when using property as security as compared to using a share portfolio.
Lenders will lend up to 95% of the value of the property, whereas they may only lend up to 50 or 60% of the value of a share portfolio. This greater borrowing power allows you to benefit from the capital growth of a larger asset.
- The ability to add value or renovate (cosmetically)
There are hundreds of ways you can add value to your property, which will increase your income and your property’s worth.
Talking of impelling asset worth, there are a number of approaches you can use to do this, in ascending level of difficulty (and cost). One of the most common is cosmetic renovation – buying a tired property and sprucing up the interior and exterior. This can vary from simply repainting and putting in new carpets, to putting in new kitchens and/or bathrooms and landscaping gardens.
It’s a tried and true method of increasing the value of a property – even the outlay of just a few thousands can add twice as much to the right property.
The next step up from the cosmetic renovation is the structural renovation: adding bedrooms, bathrooms and so on. This is more complex than a simple cosmetic job – with more scope for things to go wrong and costs to blow out – but can also be significantly more profitable.
- It’s an asset you can use
Investment or not, your property is still just that – a property. So, should events take a turn which means you have to move into that property, you can (pending rental agreements, of course) whether for the short term or the long term – and, if things change again, you can move back out, leaving your investment intact. That’s a hard thing to do with a share certificate or a bar of gold.