For the second year in a row, Americans named real estate the best long-term investment, according to a Gallup poll conducted in April 2015.
Out of real estate, stocks, gold, savings accounts/CDS, and bonds, real estate led with 31%, followed by stocks/mutual funds at 25%. And it’s not hard to see why. Out of all the investment opportunities available to Americans, real estate provides one of the greatest wealth building platforms.
For first-time homebuyers, purchasing a home marks an unrivaled opportunity to build wealth. Over the last 15 years, the net worth of the typical homeowners has ranged between 31 times and 46 times greater than that of a typical renter. For many Americans, this is the primary way the increase their net worth over time.
Real estate also provides numerous advantages over other investment vehicles for those interested in purchasing an investment property. When compared to stocks/mutual funds or bonds, real estate provides numerous advantages.
Cash flow is the most powerful way your real estate investment can generate returns. Cash flow occurs when you rent the property and is the total of rental income less expenses. With cash flow, real estate generates returns regardless of whether or not the property appreciates.
While you should always invest first and foremost for cash flow, appreciation is also very lucrative benefit of a real estate investment. This is especially true when investing for long-term, as real estate values have historically appreciated at a much steadier rate than other assets over time.
Finally, with real estate, you can leverage your investment dollars. In real estate, you leverage your investment dollars as a down payment for a property. Leverage is largely unique to real estate investing and is a key benefit for those seeking larger returns. For example, if you leverage $20,000 as a down payment on a $100,000 property, as the property appreciates, you’re earning a return on the full $100,000, rather than just the $20,000 invested.
Whether your a first time home buyer or someone looking for lucrative, long-term investment opportunities, real estate is one of the best investments you can make.