Real Estate Investing ranges from buying rental properties to mortgage investing. Rental
properties are the preferred way of investing in real estate but investing in mortgages is
becoming increasingly attractive.
Investors include real estate investments as valuable assests of an investment
portfolio for the following reasons:
- Diversification
- Leverageability
- Cashflows
- Wealth Creation
- Inflation Hedge
Diversification
By investing from different asset classes, the investor insures that
at least a portion of their portfolios are always doing well. In other
words, when stocks aren’t doing well, real estate and other holdings
help to maintain the overall return of the portfolio. This reduces
risk, providing less volatile, steadier returns.
Leverageability
Because real estate investment involves a tangible or hard asset,
financing is more readily available for its acquisition.
Cashflows
Real Estate is a cash-generating investment, particularly in the
long-term. Income generated from real estate should be sufficient to
cover mortgage financing, taxes, maintenance, strata, and other
expenses while still providing the investor with a positive cashflow.
Over time, once the mortgage has been paid, real estate assets
provide strong cashflows that keep up with inflation. These cashflows
can be effectively used to offset, supplement, or increase income
after retirement.
Wealth Creation
Real Estate investment has proven to be a powerful method of creating
wealth over time. While the value of the property increases, the
corresponding mortgage financing is reduced in nominal terms through
regular mortgage payments. Equity is increased through both processes.
Inflation Hedge
In times of inflation, when purchasing power is on the decline, individuals
as well as investors seek assets in which to
maintain their wealth. Real Estate is an excellent vehicle through
which to hedge against inflation as it’s value increases at least as
much as (and historically more than) the rate of inflation.
CashFlow games help the player understand why real estate investing is so
popular, and lucrative. Although the Fraser Valley Wealth Builders do
not particate in real estate investing as a club, we do believe that
investing is among the best ways to develop income streams.
