When people hear the word investing, their minds jump to securities – stocks and bonds. However, putting your money into a tangible asset like real estate is a strong revenue-generating investment that many people don’t consider.
Why is this the case? Real estate may require a higher “break-in cost,” but it rewards those investors that have more disposable income with a high degree of financial independence with a low degree of risk. What exactly are the biggest advantages, and why should the average investor know more about them?
1. Complete Investor Control
When you purchase real estate, you gain a controlling stake in your investment. Should you invest in overseas residential property, you can consistently improve your investment and increase its value.
Why is this important? When you buy a stock, unless you are a large institutional investor, there is little to no chance you have any power over your money. Your investment suggests that you are hopeful of their future and supportive of their mission, but you do not sit in on board meetings, suggest product campaigns, or pitch new business ideas. Despite the best market outlook, stocks can ricochet up and down because of events entirely out of the investor’s control.
That is not the case with property investment. Interiors can be renovated, smart features can be installed, and you can rip out the floorboards to install a sleek wood finish. In other words, you can modify it to change market value and match the target client (renter). Whether it is a USDS $10,000 “fix-and-flip” project or a boutique residential penthouse, the owner has complete control over their investment.
2. Strong Cash Value
A second strong advantage of owning property is that real estate itself is collateral. Collateral is something that can be forfeited during a default, which lenders will accept as a kind of security for a loan.
Why does this matter? Should you approach a bank or company for a loan, they can see exactly what their money is backing up. Property can be appraised and physically visited, and therefore makes lenders feel more secure when they extend you a line of credit.
Unlike stocks that can drop 40% in a few hours, fluctuations in property prices are much smaller. In fact, borrowing money to purchase stocks is often limited to experienced traders, and can carry a high degree of risk.
Because of it’s inherent strong cash value, real estate does not require as much experience as successful securities traders. Warren Buffet worked the stock market since he was 13 years old, and after 30 years of experience he made an average, stable profit of 20% per year. If you owned a house in Beijing for the last two decades, you would have seen a steady, passive profit of 16% per year.
Now, Beijing’s property price is high, but is it possible to invest in the next Beijing? Property investors are turning to properties in developing countries that offer high returns, as well as financial independence and strong cash value. The rise of online aggregators and property services are streamlining this investor journey, and they remain crucial services in an international and digitised market. We encourage all of those who have made it this far to tune in to future Denzity publications for your real estate investment education, and potential next investment.