Is Investing In Real Estate Still Worth While?
Real estate used to be the backbone of any investment strategy. As a long term investment, it was secure, could be insured for damages, and if rented out, could produce a small income. For many, the events of recent years has soured this investment channel. Should it, and is real estate still a worth while investment?
One of the problems we seem to face today is the desire for quick profits. It is only the wise investors that look at long term profits and they are the ones that eventually profit the most. Those looking to short terms gains are often the ones that get their fingers burnt. Yes, real estate has taken a sizable hit with some property values dropping by 50%. However, if markets improve at a modest 4-5% per year, the compounding effect will recoup that loss in around 8 years – from there it’s all profit again (depending on the cost of the money used to buy your real estate of course).
We are not investment advisers so I can’t recommend real estate (or anything else) as an investment. I can, however, point out some of the facts related to real estate as of today. Prices are very low and they are probably at their lowest. Interest rates are low and, again, probably at their lowest. In both cases, the long term expectations is that they will rise. To top this off, demand for rental accommodation is very high. This is the perfect scenario for those that are cashed up and looking to invest.
I do emphasis cashed up. To take advantage of low interest rates, you need to put down the largest possible deposit. If you can enter the market with a 20-25% equity, your loan is a lot lower, your repayments are lower, and your ability to build equity quickly is improved. You will also not be faced with any negative equity issues should prices slump a further 5-10% – although this is unlikely.
Talk to a financial planner or investment adviser. Real estate is primed for those looking for long term investments if you are financially secure. If you’re looking for short term investments then you are better off looking at other options.
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