A few years ago, before the recession and the housing crash drowned out these notions, almost every investor big and small swore by his investments in real estate. The idea that property was the one investment that was a sure fire winner was so common that it was practically an axiom. Then the housing bubble burst, leaving investors with huge debts and property on their hands that was speedily spiraling downwards, value wise.
In spite of several shoring up efforts, housing is yet to regain the ground it lost. Home values are still low and the buyer is still playing the dominant role in this market. However, in spite of the dramatic decline in the market, real estate is still a good investment.
Buying Better Option Than Renting
Real estate is a good investment as long as you own just enough property to meet your living needs. The worth of this investment lies in the fact that it eliminates the expense of rent that you would otherwise have to pay. Rental charges are very unpredictable and they can move with great volatility over a period of just a few years. Your decision to avoid locking up funds in a home because rents are not all that high may well be a poorly thought out plan once rents start zooming up. You might end up paying rents that are comparable to the monthly installments that you would have paid on a home mortgage.
Fundamentally Sound Market
While investing in a home for you to live in is a good idea it is also a good plan to invest in real estate funds. Housing is an essential expense and a basic demand for housing in the market is guaranteed at all times. By investing in funds, you avoid paying other associated costs of acquiring property, like mortgage, maintenance, taxes etc but still gain any advantage that is to be had from rising property values in the long term. Your net exposure to the investment is also very much under your control unlike when you invest in physical property.
Buying to Rent Out
Investing in property that you intend to rent out also makes sense especially when you can get a fixed rate mortgage in a low interest climate like at present. As years go by, rental values may go up but your mortgage payments will remain the same throughout the life of the loan. In effect, you stand to get better and better returns for the same investment in the house. At the end of the mortgage period, you have a big asset that has not only improved in value over the years but also generated returns through that period.
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