Why Real Estate Investing is the Best Investment Strategy

Why Real Estate Investing is the Best Investment Strategy: A Beginner’s Guide

Hi there! If you’re new to the world of investing, you’re probably wondering where to start and which investment is best for you. With over 20 years of experience in real estate as a licensed broker, landlord, and owner of an MLO brokerage, real estate brokerage, and property management company, I can confidently say that real estate investing is one of the most powerful and reliable ways to build wealth. But don’t just take my word for it—let’s break down why real estate stands out compared to other types of investments and why it might be the perfect fit for you. – Jorge Vazquez CEO 

1. Real Estate is a Tangible Asset

First things first, what exactly is a tangible asset? Simply put, it’s something you can see, touch, and use. Real estate is a perfect example of this. You can live in it, rent it out, farm it, or even turn it into a business like a bed and breakfast. The fact that you can physically interact with real estate gives it a level of security that other investments—like stocks or cryptocurrencies—simply don’t have.

Think about it: when you buy a stock, you’re essentially buying a piece of paper (or more accurately, a digital entry) that says you own a small part of a company. If that company does well, great—you make money. But if it doesn’t, your investment can lose value quickly, and you might be left with nothing. On the other hand, real estate is something you can actually use, regardless of what the market is doing. It’s this tangibility that makes real estate such a reliable and comforting investment, especially for beginners.

2. Steady Cash Flow Like Owning a Franchise

One of the biggest draws of real estate is the potential for steady cash flow. Now, you might be wondering, what exactly is cash flow? It’s pretty simple: cash flow is the money you have left over each month after all your expenses are paid. In real estate, this usually comes from renting out your property.

Imagine this: each time you buy a rental property, it’s like opening a new franchise—like a Subway or a local pizza place. Here’s how it works: you buy the property (your “franchise”), hire a property manager (your “business manager”), and then find a tenant (your “customer”) to rent the place. Once everything is set up, the money starts coming in regularly, and the best part is that it often increases over time due to inflation. It’s almost like having a business that runs itself!

This consistent, predictable income stream is one of the most attractive aspects of real estate investing. Even if you start small, you can gradually build up your portfolio of properties, each providing you with a reliable income.

3. Appreciation: Your Investment Grows Over Time

Let’s talk about another exciting aspect of real estate—appreciation. Appreciation is the increase in the value of your property over time. This means that not only are you earning money from renting out your property, but the property itself is also becoming more valuable as the years go by.

For example, let’s say you buy a property for $200,000 today. Ten years from now, that same property could be worth $300,000 or more. That’s an additional $100,000 in value just from holding onto the property! Over time, real estate has consistently appreciated, meaning that it tends to increase in value.

Now, you might be thinking, “But what if the market crashes?” It’s a valid concern, and yes, real estate markets can experience downturns. But here’s the thing: even after downturns, real estate values have historically bounced back and continued to grow. If you’re in it for the long haul, real estate appreciation can be one of the most powerful tools for building wealth.

4. Leverage: Making Your Money Work Harder for You

One of the coolest things about real estate is the ability to use leverage. Leverage is when you use borrowed money to increase the potential return on your investment. In real estate, this usually means taking out a mortgage to buy a property.

Here’s why this is awesome: imagine you want to buy $100,000 worth of stocks. To do that, you’d need to have $100,000 in cash, right? But with real estate, you don’t need the full amount upfront. You might only need 20%—or even less—of the property’s price as a down payment. The bank lends you the rest, and you get to enjoy the full benefits of owning the property.

In some cases, you can even finance 100% of the property’s value, meaning you’re essentially controlling a valuable asset with little or none of your own money. This is something that’s very hard to do with other types of investments, making real estate a unique and powerful tool for growing your wealth.

5. Forced Appreciation: Adding Value Through Improvements

Now let’s dive into one of my favorite strategies: forced appreciation. Unlike natural appreciation, which happens over time due to market conditions, forced appreciation is when you actively increase your property’s value by making improvements.

Think of it like this: let’s say you buy a property for $200,000. You spend $20,000 upgrading the kitchen, remodeling the bathrooms, and giving the place a fresh coat of paint. After the renovations, the property might be worth $250,000 or more. You’ve just added $30,000 in value by making strategic improvements—a process known as forced appreciation.

This strategy is great because it’s something you have control over. You’re not just waiting for the market to go up; you’re actively increasing your property’s value. And the best part? You can often do this relatively quickly, which can help you grow your investment even faster.

6. Inflation is Your Friend in Real Estate

Inflation might sound scary—it’s the rise in prices over time that decreases the purchasing power of your money. But when it comes to real estate, inflation can actually work in your favor. As inflation increases, so do rents and property values. This means that while the cost of living might go up, so does the income you earn from your rental properties and the value of your real estate holdings.

For example, if you own a rental property and inflation causes rents to rise by 5% each year, your rental income will increase, helping to offset the rising cost of living. Additionally, the value of your property is likely to increase as well, providing you with even more equity and potential profits if you decide to sell.

Unlike other investments that might struggle to keep up with inflation, real estate tends to benefit from it. This makes it a great way to protect your wealth and even grow it over time.

7. Tax Benefits: Keep More of What You Earn

One of the most overlooked benefits of real estate investing is the tax advantages. The government offers several incentives for real estate investors that can help you keep more of your hard-earned money.

For instance, the interest you pay on your mortgage is usually tax-deductible, meaning you can subtract it from your taxable income, reducing the amount of taxes you owe. Similarly, the costs of repairs and improvements can often be deducted, providing additional savings.

Another big tax benefit is depreciation. Even though your property might be appreciating in value, the IRS allows you to deduct a portion of the property’s value each year as if it were losing value. This “paper loss” can help offset your rental income, reducing your overall tax bill.

These tax benefits can add up quickly, making real estate one of the most tax-efficient investments you can make. The more you understand and take advantage of these benefits, the more profitable your real estate investments can become.

Conclusion: Real Estate is the Ultimate Investment Vehicle

So there you have it—real estate investing offers a unique combination of benefits that make it the ultimate investment vehicle. It’s a tangible asset that provides steady cash flow, appreciates over time, offers unparalleled leverage opportunities, and acts as a hedge against inflation. On top of all that, the tax advantages associated with real estate investing can significantly enhance your returns.

If you’re just starting out, real estate might seem intimidating, but with the right knowledge and strategy, it’s one of the best ways to build long-term wealth. Remember, I started with no properties and was able to grow my portfolio to over $10 million. If I can do it, so can you. Real estate is a powerful tool for anyone looking to secure their financial future, and there’s no better time to start than now. 

Whether you’re a student, a new investor, or just someone curious about the world of real estate, I hope this guide has given you a clear understanding of why real estate is the best investment you can make. Ready to take the next step? Let’s dive in together and start building your real estate empire!