There are so many different ways to invest money: stocks, bonds, mutual funds, money market funds, CDs, real estate and much more. But what makes real estate such a unique way to invest your money?
Real estate acts as a savings account. When you make your monthly mortgage payment, you are in essence putting money away into your home. With every payment you make you are lowering the loan amount and increasing the equity. Homes typically increase in value as time goes on.
For example in July 2010 the average price per sq ft residential home in Bend was $128. In July of 2015 the average price per sq ft for a residential home in Bend is $204 per sq ft.
If a buyer purchase a home a 2000 sq ft home in 2010 using the average sq ft price they would have paid approximately $256,000. In 2015, their home, using the average price per sq ft would be worth approximately $408,000. An increase of $152,000 in equity in a 5 year span. This does not include the mortgage payments that have been made against the principal balance of the property, which would only increase the amount of equity.
Furthermore, owning rental property has even more financial advantages. First, a rental can usually pay for the mortgage plus additional income; especially, in Bend where the vacancy rate is still 1%. Owning a rental has numerous tax advantages from being able to write off the interest payments of the mortgage to being able to write off repairs made to a rental property. Rental properties can generate income, as well as, be used as a long term investment.
The one area where real estate investments lacks is in liquidity. This asset may take a while to liquidate depending on the current market status.
However, despite its lack of liquidity, real estate is an excellent long term invest when looking at the tax write off, potential to generate income through a rental, a way to save money by paying off a mortgage and a way to create equity which can be turned into future capital.