Why Invest in Real Estate?

There has been much talk of late about the state of the real estate market. Sub-prime mortgage melt down. Record foreclosures. Government intervention. The tightening of the credit markets. A whole slew of gloom and doom, right?

Not so fast. Like any other investment vehicle, the best time to get in is while others are getting out. Deals abound from homeowners who need to sell, banks that have huge inventories of properties they have taken back through foreclosure, wholesalers who also have larger than normal inventories, frustrated landlords, HUD homes, VA homes, the list could keep going. The key to profitable investing is that the deal makes sense today. Any purchase made on future values is speculation, not investing. If you purchase a property with a positive cash flow, then everything else is just a bonus (increased rents, appreciation, depreciation, etc.).

So let’s explore why real estate still is, and always will be, a solid investment. This list is far from all-inclusive; I just want to hit a few key points.

People need a place to live - Very simple and very powerful. This means there will always be a demand for housing. And our population is growing every day.

Cash flow - If you buy a property with positive cash flow, the value of that property doesn’t matter until you sell it. You are still making money every month.

Control - You cannot control the value of your stocks, precious metals, oil wells, or whatever else you choose to invest in. With real estate, you can make improvements and/or add to an existing structure to increase its value. This is especially true if you buy properties that are in need of a rehab.

Leverage - While the credit markets are a little tight right now, you can still get an 80-90% loan, depending on your strength as a borrower. Better yet, buy a “fixer-upper”, make the improvements, and if you bought it right you can refinance it and have no money out of your pocket. Now that’s leverage. Your return on your investment is infinite, because you have no money in the deal. Find a bank that will lend you money to buy stocks, bonds, or precious metals.

Appreciation - It seems a little strange to talk about right now, but real estate, like all investments, is cyclical. Some markets, like mine here in Atlanta, are still appreciating, albeit at a lower rate than a few years ago. And there are some pockets where appreciation is still at 7-8%. You can’t paint the national real estate market with one brush. And here’s the best part. Combining leverage with appreciation is where millionaires are made. A $20,000 investment in the stock market will give you $20,000 worth of stock. The same amount could give you $200,000 worth of real estate. A conservative appreciation rate of 5% would yield $10,000, a 50% return on your money. Where else can you get that kind of return?


Depreciation - Investment property has tremendous tax benefits that I won’t even try to go in to here. Suffice it to say that the cash flow from a properly leveraged property should be tax free money. Talk to your CPA.

Safety - Oil wells run dry. Companies can go out of business or file for bankruptcy. Your entire investment can be lost. Properly insured real estate will always be safe from catastrophic loss.


All of these elements work in your favor no matter which way the market is moving (with the exception of appreciation during a downward trending market). Do your homework; knowledge is vital to any investment strategy. Applied knowledge is even more vital. But I’ve never found a more powerful tool than real estate to become wealthy.