Property Futures

Real Estate News, Reviews and Investment

Reasons for Real Estate Investment

Article: how to generate income on an investment property.

Your own personal reasons for any kind of investment will vary, of course, but we’ve found at least six solid reasons for anyone to include real estate in an investment portfolio.

A wad of bills tucked under your mattress won’t gather an interest – and worse, inflation means that when you pull them out in twenty years, you’ll be able to buy fewer goods with your money than you can now.

And current banking accounts offer low interest rates, which may not even keep pace with inflation. While everyone needs access to some money on a day-to-day basis, making bank accounts essential, it’s still important to plan for the future.

  • Investing your money is a way to make it grow.
  • Real estate investment is usually considered a stable and low-risk type of investment.
    • As there is a limited amount of land available, it is very rarely created or destroyed (unlike consumer goods such as cars).

However, the risks vs returns will vary enormously depending on the situation.


1. Real estate for asset diversification

Most people will have their savings invested in several different ways, depending on how they expect to use the money. For example, one person may have:

  • An emergency fund in an easy-to-access account for things like unexpected car repairs
  • A savings account gathering money for a holiday or a wedding
  • A pension fund, often through an employer
  • Real estate, such their home, a holiday home or buy-to-let property
  • Stock shares/equities/commodities
  • Collectibles and alternative investments, such as wine, art or antiques.

A wise investor will have a diverse portfolio so that if one venture doesn’t prove as profitable as they had hoped, another might make up for it.

  • The more diverse your investment portfolio, the lower your overall risk.
  • A financial advisor can help with asset management and diversification strategies.

2. Real estate investment may save on your tax bill

Investment is usually considered to be good for the economy, and many governments encourage investment by having lower tax rates on capital gains and rents than on other forms of income.

There are also other perfectly legal ways to reduce your tax bill through wise investment – these will vary from country to country so by all means consult a local financial advisor.

  • Tax breaks for home-owners
  • Lower property taxes for second homes or holiday homes
  • Favorable rates on accounts opened for children
  • No capital gains tax for certain kinds of investment, such as government bonds

3. Real estate investment may increase income from existing savings

Workers who have already created a savings pool, whether in cash, a pension fund or other investments may be looking for ways to increase their income from these funds.

Standard bank savings accounts are usually considered very low-risk forms of investment and as a result offer low returns. Moving your money to a slightly higher-risk portfolio, such as real estate, can dramatically improve your returns.

4. Real estate investment means you can leveraging equity on an existing property already owned

Homeowners who have a positive equity on an existing real estate investment may be able to turn this into another investment opportunity by remortgaging. Find out more about leveraging home equity.

5. Real estate improves lifestyle or status

Certain investments, such as second homes or holiday homes, can improve your lifestyle while also earning an income. A holiday home close to your favourite beach might make your week or month in the sun cheaper – and also earn a pretty penny if you rent it out the rest of the year.

6. Secure housing for a child or parent with real estate investment

Buy-to-let properties don’t have to be rented to strangers, and many people find that they are able to help their loved ones and also improve their income at the same time. Such an investment may be particularly worthwhile if you are already supporting the person in question – better to help your parents buy a small property than let them struggle with high rents.

And such investments often continue to prove profitable after your first tenant has moved out.

  • Buying a house or flat in a popular student area may not only reduce the cost of getting your child through university but also provide you with profitable student housing for years after.

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This entry was posted on April 28, 2013 by in Investment and tagged , , , , .

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