Most Americans are nearly forgetting the last decade’s housing bubble since most of those affected have already recovered. The mortgage rates are low and the interest-only mortgages are back. According to bankrate.com, 27% (1 in 4) of Americans said real estate is the best investment they can venture in for money they would not need for the next decade. Cash followed with 23% and the stock market came third with 17% as the most preferred place among investors to keep their cash growing. This is coming at a time when credit is hard to come by than the time before the housing crisis and lenders are under stringent regulations. This doesn’t take away confidence from real estate investors.
Let’s look at some of the reasons that made real estate emerge at the top after three years.
“The secret of a leader lies in the tests he has faced over the whole course of his life and the habit of action he develops in meeting those tests.” ~ Gail Sheehy
The Curb Appeal Effect
The tangible nature of the real estate industry offers investors a peace of mind than bonds whose prices fluctuate from day-to-day. Only 5% of investors said that they would place a bet on investing on bonds. The real estate pricing gives confidence to investors as home prices are not subject to sudden fluctuations. Therefore, real estate investment is more of a long-term certain investment in the minds of at least 1 in 4 Americans. However, the financial planner at bankrate.com warned investors that they need to calculate first the long-term return potential of real estate investing. One should weigh this investment hand in hand with other type of investments.
Real Estate Vs Other Investments
Take a case of the The S&P/Case-Shiller 20-City Composite Home Price Index which generated an annualized profit of 9.2% over the past three years but a loss of 0.4% over the last decade. On the other hand, the stock market generated annualized 5.87% returns for the last decade and 14.8% for the last three years. It’s good to weigh, so that you can make an informed decision before you commence investing. Nevertheless, investors with good credit can borrow to purchase real estate. This enhance can returns or losses depending on the nature of the market. The best way to own real estate is to use leverage but without it, ROI will be just about 2% to 3%.
It’s Somehow a Risky Investment
Remember that you cannot sell real estate as quick as you can sell bonds and stocks. One must also incur other costs including maintenance, insurance and property taxes. You might end up eating into your returns. You cannot hedge against a down market in real estate since you can’t sell a home very fast. Real estate market is also too local and so even if prices over other places are rising steadily, the market where your home sits will define the prices in that area.