Many people often wonder why they should put their money toward investing in the real estate market when there are so many additional options available. The conclusion that they all soon come to is that real estate investment has always been the strongest form of investment for successfully building an empire.
Leverage
As you may have heard, the majority of millionaires in the world made their fortunes by investing in the real estate market. The main reason that the property market is such a powerful place to build your wealth is leverage. Once you realize this key concept, you will never look back to your life before real estate investment.
If you are experienced in the ways of the property investment world, you know exactly to what I am referring. However, if you are new to the market, you may need a little more of an explanation.
Leverage is the capability to amplify your returns, using someone else’s money. Typically, a bank or some other lending organization will provide the necessary funds to get you started investing in the real estate market.
Investment Options
Once you have the funds to begin your career as a property investor, your next step is to determine the best way to invest your money.
Some people choose to just hide the money away in their local bank. This is because this is considered a safe option. However, with a return of only about 4% or so, in ten years you will have made virtually no progress toward your investment goals.
Another common route of investment is the stock market. The stock market poses as a positive alternative to bank investments with a return of at least 12% possible each year. Although it is more profitable than hiding your money in the bank, the stock market carries no guarantee for success.
The Best Option
One of the biggest benefits to investing in the real estate market is that you are able to leverage a small amount and borrow the remaining cost of the property. Even if the market slows to an average return of only around 6%, you will make an increase on the entire purchase amount of the house, and not just the money out of your own pocket.
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Hi Sean,
You only have to look at people like Donald Trump to know that being a property investor pays off. People do become financially successful by investing in real estate.
If you buy and hold a house over the course of a lifetime, generally, it’ll increase in value. If you take this strategy and buy more than one house; you’ll hit retirement with a nice nest egg.
Leverage is the key here. If you put 10k in the stockmarket you have 10k worth of stock…if you put 10k into the realestate market as a deposit you have a 100-200k property depending on your approach. Returns are then much greater.