Many people are interested in investing in real estate, but don’t know where or how to begin. Perhaps the question we should start with is “why?” Why invest in real estate?
At Watermark Equity Group we believe there are four key reasons to invest in real estate.
1. Tangible Asset Value: Real estate gives everyday investors the opportunity to gain equity in a real, physical asset. The value of a real estate investment is not just numbers on a page; it is the timber of a building and the soil of the land. Whereas a stock’s valuation may be built solely on speculation and eventually dip to zero, real estate is always tied to the value of a physical asset.
2. Diversify Your Financial Portfolio: Proverbially speaking, putting all of your investment eggs in one marketplace basket, such as the stock market, overexposes investors to the volatility and risks of that particular market. As stock prices respond to constantly fluctuating market conditions, it becomes difficult to invest with any level of certainty. Adding real estate investments to one’s portfolio, however, allows investors the ability to spread their risk out over multiple asset classes. Real estate has historically provided lower volatility than the stock market while also producing steady appreciation. It also gives everyday investors a variety of ways to grow their wealth – from long term cash flow properties to higher yield development projects.
3. Hedge Against Inflation: We’ve all seen the recent rumblings of creeping inflation. While inflation usually hurts stocks and other asset classes, real estate investments, historically speaking, can be an ideal inflation hedge for investors. As inflation goes up, rents and real estate prices (which are devoid of inflationary pressures), increase proportionately. Just as diversification is essential for long-term success, adding real estate to any portfolio enables investors to both disseminate risk and hedge against inflation.
4. Tax Benefits: Real estate also offers incredible tax advantages compared to other asset classes. Mortgage interest, property taxes, depreciation, and operating expenses all qualify for year-end tax deductions. If investors hold onto real estate as long-term investments, properties can be passed on to heirs and sold without paying taxes on its appreciation.
To conclude, real estate investment can be an excellent addition to any portfolio, offering investors the opportunity for high yields, mitigated risk and attractive tax benefits. At Watermark Equity Group, it is our mission to help create this value and opportunity for our investors.
Mike is the Finance Director of Watermark Equity Group. Since graduating Wheaton College (IL) with degrees in Business and Economics, Mike was active in community development and was a professor of business studies before joining Watermark in 2017.