Chosing the Best Investment
What is the best investment to make? All the advantages of owning investment rental property will surprise you.
Have you ever been told to diversify into investment rental property other than owning your home? Did your financial planner tell you that real estate was the best investment? Probably not. They only like to talk about investments that they are selling!
The best type of investment uses
both leverage and compounding.
When people discuss investment risk it's the common perception today that "investing" refers to stocks. If you have ever employed the services of a Financial Planner they simply talk about what percentage of your investments should be in Bonds Vs Stocks or what kind of Mutual Fund you should buy. We are all urged to "diversify" but that term simply refers to securities.
One of the interesting things to consider when answering this question is what does the business world think about the investment risk for real estate Vs the Stock Market? That answer is quite easy to answer.
Just think about how much money a bank will loan you on a house Vs how much they will loan you to invest in a stock and the relative interest rate of each loan.
From what I know, the maximum margin loan you can get on your brokerage account is 50%. On a piece of real property the amount is 80% or more in some cases. Interest rates on margin accounts are typically over 10% Vs less than 6.5% on real property. So the business community is telling us that stocks are an extremely risky investment while real estate is the best investment.
Think about how many homes are demolished Vs how many companies go out of business.
It is estimated that 80% of companies go out of business within 5 years. And you can insure your real estate against nearly every risk - can you insure your stock portfolio?
So it seems like a no-brainer to own rental property from an investment risk perspective - it's the best investment.
Learn of the many benefits of real estate investing here.
So should you put all your money into rental properties? For me the answer is no. Sometimes the real estate markets are booming and sometimes the stock market is booming. Some people try to avoid risk altogether and seek a low risk investment . But, don't be fooled, low risk may not really be lowest risk. Since it impossible to predict the future, the best option is to have you money truly diversified into both. But in the final analysis, rental properties seems like the best investment and should be part of your financial planning.
But consider this: If you simply buy 3-4 medium rental houses and have the tenants pay off the mortgage you will have an inflation protected income that exceeds US Social Security payments.
When you are considering rental property as an investment, what type of real estate is best? Single family residential, duplexes, multi-unit residential and commercial properties all have different traits to consider. I go into a more detailed discussion here of residential real estate investing.
Can you invest in your spare time? Will investing in rental properties consume you? How big should you go? Learn more about your real estate career here.
Once you decide that you want to invest in real estate, it's time to set goals. Here's is how I do goal setting.
Link from Best Investment to Residential Real Estate Investing
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The materials contained on this website are provided for general information purposes only and do not constitute legal or other professional advice on any subject matter.
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