Investing in real estate has always been one of the most effective ways to earn a good return on investment. The opportunities that the housing market offers are almost endless and property investors of all levels of experience can reap massive rewards if they implement the right investment strategies. In this article, we will reveal 15 real estate facts that will change your outlook on this sector.
The 15 Real Estate Facts You Should Know
The real estate facts that are listed here are designed to help you familiarize yourself with various aspects of the market. The list covers everything that a beginner real estate investor should know before getting started.
1 – Real estate investing is one of the best ways to secure an early retirement
Becoming a real estate investor can help you build a sizable nest egg in a relatively short period of time. By buying an investment property and renting it out, you can generate a steady positive cash flow for years. As long as you properly manage this money and continue to slowly build your rental property portfolio, you can put the extra income towards securing an early retirement.
2 – Real estate has a low barrier to entry
One of the most interesting real estate facts is the low barrier to entry of the housing market. Contrary to popular belief, you don’t need to invest big to start making money with real estate. In fact, you can put in as little as 15% of the total sum of the investment. This makes real estate a much more interesting option than traditional stocks or bonds.
3 – Real estate appreciation will send your net worth soaring
Appreciation is one of the main reasons why you should consider investing in real estate. A real estate portfolio will appreciate in value over time without requiring any direct intervention on your part. You can expect an average appreciation rate of 5% in most markets. Consequently, your net worth will grow exponentially in a rapid fashion.
4 – Investing in real estate is the best protection against inflation
Owning a rental property can be the perfect hedge against inflation. While most assets tend to wilt under inflation, real estate experiences a boom during those periods. The reason for this is quite simple. As inflation increases, so do the value of your investment property and the rental income that it generates. Moreover, the average appreciation rate in the US has consistently been higher than inflation rates, so real estate investors are assured of beating price spikes regardless of their strategy.
5 – Real estate investing comes with several tax benefits
On top of its high-profit potential, real estate offers a number of tax benefits. First of all, income that is generated through real estate investing is not subject to FICA. The only exception to this is when this income is paid as a salary through a holding company. In addition to this, there are other benefits on lower capital gains, refinancing, depreciation, and 1031 Exchanges.
6 – Millennials constitute the majority of home buyers
US housing market 2019 data shows that millennials have completely eclipsed baby boomers and Gen Xers when it comes to buying homes. They’re also expected to take on more mortgages than any other demographic by next year. The implications for real estate investors are not negligible. As a matter of fact, this shift is an encouraging sign. If you plan on buying an investment property to quickly sell it, you should be able to sell it if you first learn what millennials are looking for.
7 – The real estate market will continue to grow
Of all the real estate facts on this list, this is probably the most consequential one for reticent investors. Despite some bearish resistance a few years ago, the US housing market 2020 projections are overall bullish. More importantly, all the indicators that are used to predict market growth are trending upwards. Here is an overview of the most important ones:
- The unemployment rate is low and the job market is offering new opportunities
- Fewer buyers are using interest-only home loans
- The younger generation is willing to invest in real estate
- Taxes are fairly low
- Spending in the economy is steadily increasing
8 – Even subpar neighborhoods are attracting buyers
This doesn’t necessarily fall in the category of real estate facts as it is subject to variable market conditions. Still, current market trends seem to indicate that even properties situated outside the best neighborhoods are selling well. This is especially the case in large real estate markets. The fact that areas without easy access to highways or essential amenities are performing well bodes well for real estate investors.
9 – Your real estate investment will pay off your loan
One of the amazing facts about real estate investing is how effectively your loans can be paid off. By renting out an investment property, you will be able to generate enough income to pay off your debt in a gradual manner. In essence, your tenants are helping you build your wealth and equity with each monthly payment they make.
10 – No other investment affords you as much control as real estate
When you make a real estate investment, you’re completely in charge every step of the way. Everything from the strategy you want to implement to the mortgage provider you want to get your loan from is up to you. Furthermore, you have the option of screening tenants and only renting to those who fit your requirements.
11 – You will always be able to sell a real estate investment
During recessions and strong economic downturns, it’s not uncommon for companies and institutions to go bankrupt or default on their debt. This can effectively wipe out your entire investment if your portfolio is made up of stocks and bonds. On the other hand, you will always be able to sell a property even in the worst economic situations. Investing in real estate is the perfect way to mitigate the risks of financial markets.
12 – Real estate makes for a relatively stress-free investment
While this does not apply to all strategies, real estate is not as stressful as other ventures. This is due to the fact that the real estate market is more stable and less volatile than other markets. Trends take longer to materialize and a real estate-based portfolio is not affected by every market dip. Additionally, you have the option of taking a hands-off approach when it comes to managing the investment property. Hiring a professional property management company that manages the rental property on your behalf will save you both time and effort.
13 – Flipping can still be profitable
This is one of those basic real estate facts that even novice investors know. Flipping properties has always been one of the best ways to make money in real estate. While this investment strategy is not as easily implementable as it was during the last boom period, you can still find tremendous opportunities if you conduct a thorough property search.
14 – Data analytics is an essential component of real estate
Getting rich with real estate is heavily reliant on carrying out in-depth market analysis. Such an analysis makes use of various metrics that reflect the value and earning potential of an investment property. Data has become an integral part of every real estate investment strategy.
15 – The holidays are the best time to invest in real estate
The last item on our list of real estate facts is this little known tip. Savvy investors and industry experts believe that the best time to make a real estate investment is during the winter. This is based on the belief that negotiations are easier to conduct around the holidays because the sense of goodwill is high. As a consequence, sellers are more likely to cave in and the likelihood of landing a good real estate deal increases.
The Bottom Line
These real estate facts constitute an important basis for grasping this multifaceted and lucrative sector. Take the time to understand every aspect of real estate and start looking for investment opportunities once you feel you have a firm grasp of all the variables.