Why Should College Students Invest In Real Estate?
Investments in real estate are and will remain profitable. Surveys show that the revenue generated by real estate companies was valued at almost $10 billion last year. It is estimated to exceed $14.5 billion by 2030. This means a compound annual growth rate of 4.8% between 2020 and 2030.
While the housing market is a highly competitive field, investments in real estate can yield significant earnings. There are several reasons why you should make up your mind to invest in it. Let’s get started reviewing specific reasons in detail.
• Income
This looks like a no-brainer. You can rent out your property to start generating income. It can be a major source of your cash flow. Clearly, you will be covering your mortgage and maintenance costs, but with prudent management, you can have a stable and predictable profit that can build up your equity over time.
The above means that you should do your due diligence before you pick properties for investment. Don’t rush things. Find out everything there is to know about the property under consideration. This will be time well spent.
• Appreciation
Unlike cars and other depreciating valuables, real estate values are likely to go up as you move forward. Only in rare cases do they start depreciating. All the more reason to do your research before you make your investment decision. When you complete a thorough risk assessment and identify risks, you can also find ways of mitigating them. If there are no major risks identified, you can rest assured that the property will cost a lot more years later.
The same applies to rents. They also tend to increase over time. If you are smart enough to invest in real estate that is located in a strategically important location where the local authorities plan major infrastructure projects, you can expect both property prices and rents to get a major boost.
• Protection against volatility
Many investments, especially even when the return on investment is said to be high, can be subjected to high volatility rates. People hope for huge profit margins in cryptocurrency markets, for instance. But we know how unpredictable and volatile that market is. Indeed, there is just one step from the sublime to the ridiculous in that field. It can make you filthy rich overnight, but it can easily make you go bust too.
Historically, real estate is known to be one of the safest investment options. Properties are not sold at breakneck speed like stocks, so they are less vulnerable to impulse decisions and risky fluctuations. Another advantage is that real estate can be traded in separate and multiple places. Last but not least, people can survive without stocks, but they always strive to buy a house or an apartment. It is one of the most important and sought-after investments for people when they get rich.
• Tax deductions
Depending on where you buy real estate, you can count on an array of tax breaks or deductions. Again, this underscores the importance of studying local regulations, tax systems, and related opportunities to make savings.
As an investor, you can count on making deductions from operating and managing costs. Depreciation costs should also be factored in. If you can manage your asset prudently, these can amount to significant savings.
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• Safeguard against inflation
We all suffer from inflation. When prices go up, we rarely see them go back to previous levels. But when that happens, real estate prices follow suit immediately. Inflation pushes real estate and rental prices to go up as well.
You need to take this into account when drafting your lease agreements. Don’t forget to include a clause that allows you to review the rent on an annual basis in light of the current inflation rate.
• Diversification
If you are lucky enough to have the means to consider different investment options, you should definitely consider diversification as a major means to safeguard against depression, inflation, and other risk factors. Real estate is considered to be one of the safest modes of diversifying your assets. It is generally correlated with other asset classes negatively.
This means that the depreciation of other assets does not necessarily lead to the depreciation of your real estate. In fact, you can rely on your real estate as your major resource in times of crises and hardships. For instance, stocks can make you rich. But if the stock market crashes, you can wake up bankrupt one day.
That rarely happens with real estate. Even when the real estate market suffers, the consequences are not as devastating. In addition, you can always use smart insurance strategies to safeguard against losses.
• Identify your knowledge gaps and address them
As you move forward, don’t forget to identify your weaknesses, knowledge gaps, and drawbacks. Don’t let them slow you down. Instead, consider them as opportunities for improvement and learning. Do talk to experts, learn everything there is to know about your investment plans and potential, and enjoy the benefits of smart real estate investments in the years to come.
Bottom Line
The real estate market provided great investment opportunities. If you do your due diligence, you can enjoy a high return on your investment. The price of real estate usually keeps rising. Even when they fall, the change is not as steep and as painful as other assets, such as stocks. Other benefits include a steady cash flow, tax breaks, and diversification of your investments.
But it is not always plain sailing. You should be wary of any associated risks. That’s why it is important to spend a lot of time studying the pros and cons of your investment decisions. Identify risks early on and develop effective mitigation strategies.
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