1- Nearly Risk Free- When you invest in real estate you are buying a physical property. Unlike the stock market you have something tangible. 10 years from now you know your property will be worth something to someone. The same cannot be said for a stock. Historically, real estate doubles in value every 10-20 years.
2- Tax Breaks- There are several tax laws that allow real estate investors to defer gains and write off expenses. Depreciation alone is huge win for investors. http://www.memphisturnkey.com/depreciation-one-of-the-greatest-benefits-of-rental-property/
3- Hands Off- Use a property management company and you don’t have to get your hands dirty. Let them deal with all of the issues. You can sit back and collect a check each month.
4- Diversify - You hear this all the time right? It’s true. Don’t invest all of your money into the same type of investment. It protects you from fluctuations in a specific market. Personally, we even diversify within real estate. We try to by different types of properties, in different cities. This way if something unfortunate happens in Lancaster City we don’t have all of our eggs in one basket.
5- In Demand - Central PA has a shortage of affordable rental units. Due to the shortage, landlords can continue to raise rents and raise the bar when screening tenants. Current occupancy rates exceed 97% in Lancaster County. http://lancasteronline.com/news/local/lancaster-county-lags-state-in-affordable-housing-new-study-shows/article_685177b0-b0aa-11e4-8ece-238e6c75a076.html
6- Growth - Central PA’s population continues to grow steadily. Lancaster and Berks County are projected to grow faster than almost all other PA counties over the next 20 years. Lancaster’s projected growth is 2nd in the state. http://lancasteronline.com/news/local/lancaster-county-population-births-location-to-fuel-nd-fastest-growth/article_98602952-d327-11e4-a8c9-a34af1031151.html?mode=image
7- In Control- You are in complete control. You decide what property to buy and how to manage it. When I originally decided to invest in real estate this idea of control is what won me over. For better or worse I like to be in control. My understanding of the stock market is somewhat limited so I felt like I was at the mercy of my financial advisor when investing in stocks. That made me uncomfortable.
8 - Improving the area- Some people feel a civic duty to improve the local area. If you feel this way look no further than your nearest city. One of the most satisfying feelings is moving a new tenant into a recently rehabbed house. One house at a time we can help improve the quality of life for a city residents.
9 - Great Lending Rates- Banks are lending money at historically low prices. A well qualified investor can borrow money for around the same price of inflation. 3%-5%. This is like like borrowing money for free. Rates will continue to rise over the next decade so take advantage of these rates now. http://www.mortgagenewsdaily.com/mortgage_rates/charts.asp
10 - Lastly, Stable Long Term Returns - Over time both stocks and real estate investments will provide high percentage returns if done prudently. One undeniable difference is the stable nature of investment properties. The instability of the market was clearly captured during the last two full decades. The 1990’s stock markets produced a favorable return of 18% while the 2000’s produced a return of only 1%. If you were heavily invested in stocks and about to retire in 90’s things probably worked out well for you. However, if you were heavily invested in stocks and about to retire in 2000’s you probably ended up working longer than you hoped. http://www.stockpickssystem.com/historical-rate-of-return/
Real Estate Investment properties are much more stable. When the housing market collapsed in 2007 rent prices actually increased. If you are relying on rent income for your retirement income you can rest assured that rent prices will not fluctuate like most other investments.