Benefits of Real Estate Investment vs Stocks and Bonds
Real Property Management Answers Why Investing in Property Remains Viable
As the economic recovery continues to build, Americans are again able to consume and invest; and with recent reports from the U.S. Census Bureau noting 34 percent of American households are rental units, investors are taking notice and rushing to reap benefits of placing investment funds in single- and multi-unit residential property.
"Investor demand for single-family properties remains strong," said Kirk McGary, CEO of Real Property Management, citing a recent study from Zelman & Associates that found investor demand for residential properties ranking at 60.9 on a scale of 0-100. "Trends like this in the housing market have created significant demand for property management companies like ours, as investors choose to put their money in real estate as opposed to the alternatives."
Although there are many investment options available, real estate vehicles offer the ability to finance a portion of the purchase price to leverage the initial investment to control an asset valued much higher – unlike stocks, bonds and CDs. With lower interest rates available, a small increase in the value of leveraged property investment can carry a greater return than an unleveraged investment – approximately 12 percent gross according to the same study by Zelman and Associates.
Investing in real estate also offers tax benefits where earnings from investments in CDs, bonds, and stocks are taxed. By making deductions from the profit on mortgage interest, cost of property repairs, and depreciation, property owners are writing off the depreciation of an asset that is actually ascending providing yearly benefits to long-term investment.
Most importantly, ownership of property improves cash flow. Subsidizing the investment with consistent rental income puts money in the investor’s pocket, covering the mortgage, repairs, and additional homeownership costs. Being able to minimize tenant turnover through timely and concise management reflects on the bottom line, maximizing the return on investment over time.