Why is Real Estate a Good Investment? ~ Hampton Roads Real Estate Ramblings

Why is Real Estate a Good Investment?

Sunday, October 26, 2008

Hello Hampton Roads,

When you ask yourselves the question, "Why is real estate a good investment?", consider fact that real estate has been the main avenue for wealth for many people in this country. A survey by Citi Smith Barney found over 50% of millionaires and 40% of affluent investors believe real estate is a good investment.


In addition, two notable facts are: 60% of the average home owner's wealth comes from their home equity. The average renter's net worth is $4,800 while the average home owner's net worth is $171,000.
Real estate, while being a tangible, immovable asset, provides it's owner with a sense of security. Real Estate appreciate over the long run, provides tax benefits, depreciation, and potential cash flow. Let's explore these reasons which make real estate a good investment.

  • Appreciation--Since 1968, houses averaged an appreciation rate of 6.34% a year and real estate has often been considered a hedge against inflation. Click the following link to view this historic trend of housing sales prices: USA Real Estate Median Sales Prices of Existing Homes since 1968. In addition, both appreciation and amortization of the mortgage increase the equity position in the property which is realized when the property is sold.
  • Tax Benefit--Whether used as a primary residence or investment property, real estate provides tax benefits in the form of deductions in interest payments, taxes, and points paid for a mortgage. In addition, investment properties may enjoy other tax benefits such as deductions in condo and home owner association dues.
  • Depreciation --Many people believe depreciation to be the best reason why real estate is a good investment. Residential income property is depreciated over 27.5 years on a straight-line basis. Commercial property is depreciated over 39 years on a straight-line basis.
  • Depreciation of Personal Property in Investment Real Estate-- Personal property used in operating the property, such as appliances, is depreciated over shorter periods, typically between 5-10 years. Also automobiles and trucks used in the investment operation can be depreciated over their useful lives.
  • Cash Flow -- Investment real estate can provide positive cash flow to owners and in the best case scenarios, can be structured so that the rents fully support the property and is not subsidized with out of pocket cash from the owner.


No matter where you are in your home search, if you would like more information about purchasing your first home or investment property in our area, please feel free to contact me.



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For your real estate needs, visit my website at
http://www.hamptonroadsrealestate.us/