You are looking to invest and, unless you have been living underneath a rock, you’ve been hearing a great deal about real estate as the preferred investment choice. Every where you look you see articles about real estate investing. Heck, lately many surveys are showing real estate as the preferred investment choice over stocks, metals or anything else.
Demand side is large and growing
Considering the fact that our population in the U.S. is growing at the rapid pace of netting one new person into our population every 11 seconds (wow, that is a lot of people) the growth rate is staggering. Yes, considering births, immigrations and deaths the population net growth is creating a huge growth in household formation. Add to this, the fact that the U.S. has been choosing renting a home over buying a home at the largest pace in over 20 years. 37% of all households are now renting and they continue to renew their leases.
Household formation continues to grow and in large part to our biggest population pool; the millennials at (over 25%) and the majority of these prefer to rent. The second largest pool in our population is of course the baby boomers (just under 25%) that are downsizing and many boomers prefer the mobility that renting affords them as well. So the rental base is solid and growing.
Over the past few years more apartment buildings are being built to help fulfill this need. Plus a large number of single family homes have been converted from owner occupied to tenant occupied. By most accounts the supply side of rental units are starting to catch up with the demand which will reduce the rapid rent increases and start to ease into a more stable balance for supply and demand. Yes, the need for these rentals indeed exists and creates very viable investments for those who wish to enter this investment field.
Growing tenant base creates more investor opportunities
So the obvious investment protocol of finding a need, fulfilling the need and you have a great business model is running rampant within the real estate investing arena. Those of you who are looking into real estate investing are looking for wealth creation. Real estate of course is the only investment vehicle that offers all 5 wealth building principles.
5 wealth building principles
Income = your positive cash flow
Deductions = the best tax deductions especially for investments are found within real estate.
Equity build up = tenants pay down your principal every month they pay rent / your mortgage.
Appreciation + national average over 50 years is about 6%
Leverage = an investment that allows you to borrow 80% + of the value and reward you for 100% of its benefits.
Now if you notice the first letter of each of these wealth building principles spells out IDEAL. This of course is because real estate is the Ideal Investment.
THE BEST OF THE BEST
It is easy to see why so many have chosen real estate as their ideal investment vehicle. Now to find the best of the best, investments that are sustainable. Having all 5 wealth building principles at play requires sustainability to each of one these principals.
This unfortunately is where many investors fall short. Their thought process is buying the best investment vehicle and you win, right? Not all real estate investments are created equal. While owning investment real estate can be a passive investment as you may elect to hire a property management company (great choice), it requires proper due diligence.
The 2 most overlooked analytics in buying investment real estate
Now Location is something everyone should know about. Interesting enough, as it relates to investment property, most forget this and quite frankly this may be the most important time to remember it.
Sustainability goes hand in hand with the location and incorporates the locations economic outlook as well.
Do not be intimidated by this it is easier than you may think. You can identify how to find the best locations in this post titled what does Location, Location, Location Mean to the Investor? And sustainability due diligence in this post… 7 Sustainable Cash Flow Secrets Revealed
If you can get even deeper into this topic in this eBook; 7 steps to Buy and Hold real estate investments.
Investing in real estate is like golf, it is simple but not necessarily easy. Just as hitting a small ball into a hole and scoring is simple enough it is not necessarily easy. Buying the best investment vehicle is simple, it is not necessarily easy. It requires proper due diligence to buy the best property within the best location that offers the most sustainability, so research and get informed first and you will generate investments worth owning.