An Answer to the Whats and Whys of Real Estate Investment
Land has always been a sign of power and wealth. It is an irrefutable logic that transcends time, cultures or any languages in the world. As Winston Churchill once said: “Land monopoly is not only monopoly, but it is by far the greatest of monopolies; it is a perpetual monopoly, and it is the mother of all other forms of monopoly.” Yet, what is it about owning land that makes it so interesting to the eye of the beholder? How can we harness that power into a passive income that lasts us through the ages? The answer is simple and it lies in real estate investment.
Firstly, What Is Real Estate?
Real estate is the ownership of rights over a certain property, land or building including the air above it and the ground beneath it. Remember the life simulation video game The Sims where you can build your house however you wish it to be barring real-life restrictions? Real estate works exactly like that with the additional benefit of drawing in income when put through the investment chute.
So, What Types of Real Estate Are There?
As can be seen from the diagram above, real estate can be broadly classified into four categories:
- Residential real estate (i.e. condominiums, townhouses, penthouses etc.)
- Commercial real estate (i.e. shopping malls, educational institutions, hospitals)
- Industrial real estate (i.e. manufacturing places, warehouses, research centres for product designs etc.)
- Vacant land (i.e. farms and ranches)
Now, What Makes Them Fantastic Investments?
Real estate is one of the biggest assets in the investment market, and can be costly to get started. Yet, its high barriers of entry has not stopped others from flocking to it as a source of passive income. What is the reason behind this phenomenon? Well, let’s break its beauty down and see it for what it’s worth. Here is a list of the 3 reasons why real estate makes fantastic investments.
1. Real Estate Investments Have High Tangible Asset Value
Perhaps one of the most striking reasons why real estate investment remains popular with the crowd is that this asset infringes upon the routines of our daily lives. It is tangible and made visible through bricks and mortar. The interest of investors are less dependent on the integrity or competence of the middle-men involved unlike stocks or to a certain extent, bonds. This high accountability is not merely limited to real estate property but also in its counterparts: listed real estate securities. In fact, real estate investment trusts (REITs) are bound by regulations to pay out a minimum percentage of profits as dividends to its investors.
2. Real Estate Investments Have Amazing Tax Benefits
Not many notice this but real estate is one of the best assets to invest in when it comes to its taxation. As real estate is a tangible asset made of bricks and mortar, wear and tear is expected over time and its value depreciates. For instance, under the Internal Revenue Service (IRS) of the United States federal government, residential real estate can depreciate in value over 27.5 years. Translated into taxes, it simply means that one has to pay less taxes over time due to the property’s wear and tear. The secret to real estate, however, lies in its simultaneous appreciation in value despite the depreciation in its infrastructure. This may sound contradictory but a building’s lifespan has little effect on the value of land it is on. For instance, a century old church may contain little value due to its decaying infrastructure but if it is built on a hot tourist spot, the land itself can command a high value due to its location. Amazing, isn’t it?
3. Real Estate Investments Can Diversify Your Portfolio With Stable Income Returns
Slow and steady wins the race and that is clear with real estate investment. According to statistics provided by Investopedia, throughout 1977 to 2007, nearing 80% of the total real estate returns of United States was derived from income flows. This makes investing in real estate less volatile as it is dependant on income return rather than capital value return which is subjected to market conditions. Real estate is also the winning champion among those assets reliant on income return and trades at a yield “premium to U.S. Treasuries” as stated in Investopedia.
That isn’t all. Real estate usually lives in a world of its own as an asset and has minimal correlation with other major asset classes. This means that the addition of real estate to an existing portfolio can aid in diversifying the portfolio, lowering its volatility while providing a stable income with lowered risks.
Conclusion?
Much like before, land remains synonymous with wealth. Not only is it a symbol of power, it can also turn into a valuable asset when invested correctly.
In this article, we have covered the broad context of why real estate is an esteemed value for investment, but we have yet to tell you how you can invest in one yourself. Interested to find out more? Stay tuned to Part 2 of this article where we dive deeper into how your investment journey in real estate can be enhanced with blockchain technology.
To find out more about Konrad, check out its socials at:
Bitcointalk: https://bitcointalk.org/index.php?topic=5148889.0
Facebook: https://www.facebook.com/KonradPlatform/
Medium: https://medium.com/@konradholdings/
Reddit: https://www.reddit.com/r/Konrad_Official/
Telegram: https://t.me/konrad_En
Twitter: https://twitter.com/KonradHolding
Website: https://www.konrad.holdings/
Weibo: https://www.weibo.com/7041318945/profile?topnav=1&wvr=6&is_all=1
