With any investment there are different expectations of return. When buying stock you want to see appreciation of the stock value or possibly dividends from the company or organization. With bonds, you’re looking for a predictable yield from the bond payments. With real estate property, there are various options available to see a return on your investment.
Here are some of the ways you may see a growth in net worth from real estate investment properties and also provide good financial return on investment.
Revenue From Rental Income – Value from rental revenue from correctly chosen and properly managed rental properties will supply a steady stream of income as rental payments are received from tenants. In the past, this return percentage has risen above that of dividend yields of other investment options on a consistent basis. The real estate investor has a greater level of control over risk and can predict future value as an added benefit. Housing downturns can occur in some real estate markets with homes being sold for less than their purchasing price after a few years. Those with rental property can usually weather the storm and rent the property on a continuous basis without a decrease in rent levels due to the market changes.
Property Value Appreciation – Historically, real estate has offered a superb source of profit and ROI as a result of the increase in value of the investment property over time. In the short term and during housing bubbles (and busts) it is not possible predict the exact times of correction in the market and valuations vary considerably by area.
Improvements and Upgrades As a property generates monthly rental income it can be improved so that when it is time to sell you will receive a better price. Improvements related to the functionality and appearance of your real estate property can definitely increase its value. Depending on the needs of the market you could sometimes double or triple your money if you choose the best upgrades and improvements that are in demand. As styles and trends change, maintaining the property appeal and demand with renters will at least give you the option to retain value.
Hedge Against Inflation and Volatile Markets
Many are calling the last ten years “The Lost Decade” because many people with money in the stock market saw no gain over this time period. When inflation drives up the cost of common goods those with real tangible products (like housing and properties) will have a natural hedge against the negative effects of inflation. Having a fixed mortgage with fixed monthly payments means that when money becomes “cheap” you’ll be able to pay off your mortgage much quicker due to higher rents. At any rate, your mortgage will stay constant for some time. Home construction costs will increase which will drive more people to rent instead of building new homes. As the population continues to grow housing demand will increase which will push rent prices higher if supply is not able to keep up.
Additional Equity Lines As you pay down your mortgage, the boost in equity can be used for alternate investments and purposes. A real estate investor is also able to take away equity loans. The ability to cherry pick the best times when rates and terms are right are on of the major benefits of the real estate investor. Working with those funds can increase additional investments in other properties or for different purposes.
The Ability to Find that “Steal of a Deal” – As you master this field you will have the opportunity to buy below market price. You might be fortunate enough and have the chance to discover a value-priced property for one reason or another. Sometimes properties are categorized or you may have the first chance at a great deal. This is really an immediate technique to enhance your net worth along with your investment portfolio value.