Real estate investing involves purchasing property to generate rental income, appreciation, or both. It can include residential, commercial, or rental properties.
11. Real Estate Investing
Recommendation
Buy a primary residence if you plan on living in the same area for at least 5 to 10 years. If not invest in REITs.
- Diversification: Real estate provides a tangible asset that often behaves differently from stocks, reducing portfolio risk.
- Cash Flow: Rental properties can generate steady monthly income, providing a reliable source of cash flow.
- Appreciation: Property values tend to increase over time, offering potential long-term capital gains.
- Tax Benefits: Real estate investors can deduct expenses like mortgage interest, property taxes, and depreciation, reducing taxable income.
- Leverage: You can use borrowed capital (mortgages) to purchase properties, amplifying potential returns.
Real Estate vs. Stocks
- Volatility: Real estate is generally less volatile than stocks, providing more stability during market downturns.
- Income vs. Growth: Stocks primarily offer growth through capital appreciation, while real estate provides both income (rent) and appreciation.
- Control: Real estate allows you to directly manage and improve your investment, unlike stocks where you have no control over company performance.
- Liquidity: Stocks are more liquid and can be sold quickly, while real estate transactions take time and effort.