We are seeing more and more buyers making investments in DC real estate and taking advantage of their recent gains in the stock market. Most of the deals have been cash.
When done the right way, real estate investing can provide great returns through rental income, tax advantages and the capital appreciation gained from buying below the market value.
Here are key reasons real estate investing beats the stock market:
1. Real estate investments provide cash flow and can be a hedge against inflation.
You’ve heard it said, “Cash is king.” Whether stock or real estate, your investments should be paying you cash that you can reinvest or save for your retirement. Rental properties give a steady source of cash. Buying the right properties is key, of course.
2. Actively managed real estate provides better returns and lower risk than stock market investing.
Individual investors tend to buy and sell at precisely the wrong times. That wipes out possible gains in an already efficient market where bargains are sparse.
On the other hand, real estate is nearly immune to emotional buying and selling. As a less liquid investment, panic selling is impossible. You have more facts to make a better investment choice initially when you buy properties. And the long-term nature of real estate assets ensures that you hold on through ups and downs. All the while, rents and property prices rise due to inflation.
In general, your risk of loss goes down the longer you hold real estate investments. Your equity builds and home prices rise over time. That is unlike the stock market, where the risk typically stays the same.
3. Real estate investing provides unique tax advantages.
4. Real estate investors can use leverage to build wealth.
Leverage is a tool that many real estate investors use to build their portfolio of income-producing properties. Getting a mortgage to buy a rental property gives you leverage that you can use to invest in more properties (and different types of properties to spread your risk) with less money down.