Investment Insight: Why Real Estate Investments Continue To Pay Off


Stocks, bonds, commodities, derivatives and other such forms of investment typically go through cycles of high earnings followed by long periods of stagnation or even loss. Correctly predicting these cycles can create the opportunity for large profits. Failure to do so, however, can result in significant financial loss. Amid all of this volatility, there is one class of investments that continues to make investors’ money each and every year: real estate.

Continuous Demand

Because housing is an essential human need, demand remains more or less consistent even when economies experience a downturn. Of course, different sectors of the real estate market will experience various levels of demand depending on the existing economic climate. In a recession, for example, demand for rentals and lower-cost properties will outstrip demand for higher-cost homes. With a diverse portfolio of properties, however, real estate investors can easily turn a profit, regardless of where the demand is trending.

The Value Of Equity

Underlying all profits from cash flow in real estate investment is the concept of equity. Even if a property is not producing income at a given time, a real estate investor still derives value from the property in the form of equity. Since equity can appreciate over time, an investor can even realize an increase in value from a property that produces no cash flow.

The Versatility Of The Real Estate Market

One of the largest reasons that real estate investments pay off year after year is the fact that the means of making money in the real estate market are very diverse and adaptable to a wide range of different strategies and market conditions. Investors can flip houses in neighborhoods with rising property values to realize relatively large and fast returns, or rent properties out for a continuous stream of rental income. Since real estate investments can be so versatile, investors are able to shift with local, regional and national market conditions to remain profitable. If you have questions regarding real estate investments, consider the help of a professional like those at Mark Fox Company.

Owing to a high level of versatility, consistent demand, the prevalence of reliable subsidization programs and the ability to accrue value in equity, real estate investments have the ability to turn a profit even when stock markets are down. Of course, this does not mean that profit in the real estate market is guaranteed. Investors must still choose their deals wisely and purchase only the right properties for the right prices in order to be successful over time.

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Emma Sturgis is a freelance writer.

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