Why Invest In Real Estate



You may already know that Real Estate in the US has a historic average return of only 5%. The stock market offers a better return. I will tell you why Real Estate is actually better.

With real estate you use OPM Other people's money. Let's say you buy a $100,000 house. You only need to put down say $10,000. Your investment is $10,000 but you are getting a return of 5% on the $100,000. In your first year the house goes up 5% and is now worth $105,000. That is an extra $5,000 to a $10,000 investment. That is 50% return in a year.

Now this is not exact. First there are fees to get a loan and purchase a house. Second you are also paying a mortgage. The mortgage though also helps you. As long as you can purchase a property that can at least be rented for your monthly payment you are paying back your mortgage too. That amount you are paying off the mortgage is also adding to your net worth. You also may not get 5% one year it may be 3% the next 6%. This is just going by the average which is going to be more accurate the longer you hold the property.

 One other problem is you will probably have to pay a little more if you put down under 20%. If you can put down 10% and still pay the mortgage with this extra cost that is not a problem. Even if you put down 20% that is still $20,000 and you area earning 25% return on your investment. That is a good return. That is better than the market average. If you invested in an ETF that matches the market you would not expect to see an average return of 25%.

What do you think is real estate a good option? Have you invested in real estate? If so what was your experience? Let us know down below.




Comments

  1. Pedro Taylor ✅December 28, 2020 at 3:25 AM

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