Why investing in Real Estate is better choice for long term holding than investing in stocks and bonds?

There are 5 critical KEYS elements that allow you to build wealth for future and also allow you to live a lifestyle by your design though investing in Real Estate.

Real estate investment is an “IDEAL” investment vehicle that allows you to achieve financial freedom. Let me break them down some keys components so you deepen knowledge in this business.  Why I chose to invest in real estate is not just about building passive income, but also building wealth for the future.

I – Income:  

You will learn to buy rental properties that can generate positive monthly income after you pay for all the expenses.   This is call passive income that mean as long as you own the property,  you will continue to receive monthly cash flow.

D –Deprecation: 

The IRS allows you as an investor/owner to depreciate your rental properties that you rent out to others.  You can also depreciate the money that you pay for the rental improvements like adding new bathroom, upgrade kitchen.  You can’t depreciate the land because it does not wear out.

E – Equity:  The equity is being pay down by the mortgage monthly payment and the longer you hold the property the lower the loan balance left on your loan.   Usually the tenants who live at your rental properties will pay down the mortgage for you.

A-Appreciation:   Appreciation is a bonus for rental property.  It’s good to be conservative to count 2-3 % inflation rate yearly, therefore, your property value will increase base on the inflation.  See the chart of historical inflation in the US.  

Assuming you bought one rental with the purchase price at $100,000 and you only put down 20% ($20,000) and borrow the bank 80% ($80,000) so when the property increase base on the inflation of 2%, then your rental value is at $102,000 (increase $2000).  

So the return on your investment is at 10% ($2000(increase in value) / $20,000 (down payment).  You can build wealth for your future on a very conservative side.

L- Leverage: 

you can buy a rental property by borrowing 80% of the purchase price from a bank when you have an income to support the payment.  If not, you can use other creative financial options.   Make sure you do your own due diligent for each rental project and knowing the rental income will exceed the monthly mortgage payment plus other expenses, and still has some cash flow left at the end.   You do not need to have a lot of money to invest in real estate. 

For some investors, they started out with very little capital and have a plan to be disciplines on their spending so that they can save up for a down payment of a new rental with require only 20% down and they can leverage the bank money. Real estate investment is much better asset class to build long term wealth because it has 5 keys benefits above. 

They’re intangible asset that you can control on the day to day operation that stocks and bonds do not offer because things can change in a day within the company that you invest and you do not know about it until quarterly meeting, by then, you may lose large sum of your money.

How do you protect your investment account when the market down turns in the stocks/bonds market? Please share your comment below.