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Real Estate Investors
Watch our video to understand why you should have rental properties in your portfolio, and continue scrolling to browse our top 10 reasons for investing in real estate.
1. Real Estate Pays Good Cash-on-Cash Return on Investment
When you buy a property, you take money from liquid financial assets, including stocks, bonds, CDs, and currencies and you invest them into a tangible non-liquid asset like real estate. At a minimum, you want to strive to earn a fair cash-on-cash rate of return on your real estate investment through purchasing cash-flow-positive properties that will earn decent returns. You want to avoid those prize properties that may seem enticing but actually lead to intrinsically negative returns. For more guidance on this, please see Smart Investing — A Tale of Two Townhomes.
2. Real Estate May Be Less Risky Than Other Investments
Investments of any kind, including real estate, have a degree of risk. Development of real estate, land, tenant-in-common (TIC) investments, private real estate funds, fixer uppers, and more, all have higher risk profiles than the purchase of a nice, established cash flow, investment property. APEX Capital Group will do all of the proper due diligence, vetting, analyzing, testing, property review, and neighborhood data and trends. We believe our properties have a lower risk profile than any other investment properties.
3. Doesn’t Require a Lot of Time or Management
Some rental properties require too much time and management to make them truly smart investments. For example, vacation rentals, run down properties, bad areas, and off-campus student housing are all the types of rental properties that you want to be sure to avoid. Properties in nice neighborhoods which are rented to tenants with good credit logically require the least amount of your time to manage and maintain, which provides a greater overall return on your investment.
4. High Tangible Asset Value
Unlike stocks and bonds, an investment in real estate is backed by a high level of brick and mortar. This helps reduce the principal-agent conflict or the extent to which the interest of the investor is dependent on the integrity and competence of both managers and debtors. Through real estate investment trusts (REIT) or securities, investors who don’t own actual real estate can still enjoy the regulations that mandate a minimum percentage of profits be paid out as dividends.
5. Attractive and Stable Income Return
A key feature of real estate investment is the significant portion of the total return, which accrues from long-term rental income. Over a 30 year period from 1977 to 2007, close to 80 percent of total United States real estate returns were derived from income flows — rental income. This helps reduce volatility as these types of property investments rely more on income return than capital value return — buy and flip.
6. Rental Income
Despite low mortgage rates, homeownership is, unfortunately, a distant dream for many Americans still recovering from the financial crash. As a result, more people are living in rental accommodations. With the high demand driving up costs, rental prices are at an all-time high. This spike in demand is highly beneficial for property investors who will likely see their investments appreciate, as well as potentially earn steady monthly returns. For example from 2012 – 2014 Blackstone Capital spent $8.6 billion on housing — more than 48,000 homes — to hold and rent. For more, check out Take Advantage Of A Housing Crisis – Rent!
7. People Prefer Houses to Apartments
There is often a stigma associated with finding an apartment for rent if you are no longer a young, single college student. If someone has already had the privilege of owning a home, they might see it as a step backward to move into an apartment. Those who have previously owned homes will also generally make better tenants because they tend to treat rental homes as their home. This perception of appropriate forms of housing creates a great opportunity for you to invest in real estate.
8. Portfolio Diversification
Another benefit of investing in real estate is its diversification potential. Real estate has a low, and in some cases, negative correlation with other major asset classes. This means that the addition of real estate to your portfolio of diversified assets can actually lower your portfolio volatility and provide a higher return per unit of risk. Through our platform at APEX Capital Group, we can match you to one rental property or more depending on your investment budget. This process helps to further diversify your portfolio while increasing ROI and mitigating risk through methods such as leveraging.
9. Inflation Hedging
The inflation hedging capability of real estate stems from the positive relationship between GDP growth and the demand for real estate. As economies expand, the demand for real estate drives rents higher, which translates into higher capital values. Therefore, real estate tends to maintain the purchasing power of capital bypassing some of the inflationary pressure on to tenants and incorporating the rest of the inflationary pressure into the form of capital appreciation.
10. Building Communities
When you invest with APEX Capital Group, you are also investing in community building. Real estate is uniquely real because you’re helping others live, work, play, and contribute to their community. When you invest in real estate, your future is in the bricks and floorboards of a building that can last, and bring in cash flow for decades. Real estate investing is a truly different way to make money. Rather than counting on an interest rate and corporate gains, profits from real estate are generated by human interaction, growth, and development.
DISCLAIMER: All investments involve different degrees of risk. You should be aware of your risk tolerance level and financial situations at all times. You are free at any time to accept or reject all real estate investment deal recommendations made by APEX Capital Group, LLC. All services provided by APEX Capital Group, LLC are subject to market risk and may result in the entire loss of the client’s investment. For example, market conditions may result in the depletion of your equity, and you may lose your entire investment. Please understand that any losses are attributed to market forces beyond the control of APEX Capital Group, LLC. As you know, a recommendation is not a guarantee for the successful performance of a property and we are expressly prohibited from guaranteeing against losses arising from market conditions.