Another challenging year is about to end. As we gear up for a new year already clouded by economic challenges—what, with high inflation and a possible recession—it might be best to look for a way to park your money somewhere that will bring you a solid, risk-free investment with many upsides and an additional opportunity to draw passive income.
Despite no shutdowns recorded, 2022 continues to pose a challenge due to persistent COVID-19 scares, a major speed-bump due to inflation and many uncertainties as a result of the Ukraine-Russia conflict. With all these discouraging events, are you ready for 2023?
We all are, but with many investment options being offered, it’s always a good idea to put your money in real assets still, and among the most tangible options available today is real estate due to its low-risk nature and high-return potential. This is why many savvy investors are leveraging their assets to build their personal wealth.
This is also the reason why I encourage everyone to make smart real estate investing a part of your New Year’s resolution. For new investors, this means staying focused on finding opportunities, and deliberately doing your homework by researching on tips and soliciting advice from real estate brokers on how to leverage assets that offer low risk and high-profit potential.
The power of appreciation
Starting with the most obvious and known—among the biggest benefits of investing in real estate lies in its ever-increasing value.
With the right choice of property found in a superior community-driven location reinforced with a dynamic supply and demand ratio, you have an investment that can potentially be a winner!
Apart from an expected appreciation, the asset can become a consistent source of passive income that will increase over time. Quoting Will Rogers’ “Don’t wait to buy land, buy land and wait,” this statement still resonates with the present as real estate consistently increases in value, even outperforming other investments like bonds and capital markets especially in an economy facing inflationary pressures.
Hedge against inflation
Another benefit that is timely considering the country’s rising inflation rate is that real estate investments can be regarded as protection against inflation.
Rarely impacted negatively when the prices of goods and services increase, real estate investments generally rise in value along with inflation. Therefore, if you opt to put your property up for rent, you will be able to enjoy progressively rising monthly income and appreciation once you learn to adjust how much to charge for rent while keeping your mortgage in check. Doing so will increase your take-home income and, depending on how you view things, shield you financially when the cost of everything else would rise.
Real estate is a flexible asset
Another worthy benefit of property investing is that you can do all kinds of things with it.
As amplified in one of W+B’s policy initiatives released to its high-net-worth clients, “Real estate can be refinanced, renovated, retrofitted, rezoned and even be recycled. It is also a tax mitigating tool that can cushion the impact of any tax hit on your business. Anybody with a piece of land can plan it, develop it, lease it and subdivide it.”
Truly, investing in real estate can mean various things—from buying apartments, condominiums, constructing (and flipping) houses to renting out studios to multifamily units and to leasing commercial real estate. Real estate investment trusts (REITs) are also among the options for those who want to invest in real estate but are not up for actually owning and managing properties.
Real estate never gets old
It’s never too late to start investing in real estate. People will always need a place to live. This is also why investing in real estate is not only great for building your personal wealth but also for building generational wealth since real estate can easily be transferred to succeeding generations.
It’s certainly more hassle-free when compared to building generational wealth by starting a family business that will, at some point, come with issues and conflicts regarding roles, compensation and ownership.
Despite real estate being a low-risk investment, its success isn’t guaranteed. Ultimately, it will still depend on how you select, manage your properties and make educated decisions. This is why your strategy should always be backed by research, your level of personal commitment, financial capabilities, goals, as well as your lifestyle.
Success in real estate is a process. You have to start with a mindset that investing in one will redound to your benefit and that if you take care of your assets, you can be assured of cash flow for as long as you want. Like the old ancient Chinese proverb says: “The best time to plant a tree was 20 years ago. The second-best time is now.”
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The article was originally published in Inquirer.NET and written by Prof. Enrique Soriano III.
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