The first of many advantages of investing in real estate is the power of equity. When you own a house or piece of property, it naturally appreciates or increases in value. As you pay the mortgage down and allow the house to appreciate, you build equity. Equity is an asset that is part of your net worth, making it one of the most straightforward ways to generate wealth. For example, according to FRED, the value of homeowner equity tripled between 2011 and 2023, from $8.6 trillion to $28.7 trillion.
2.Reliable Long-term Investment
Another benefit of real estate is that even though the market fluctuates, it is a generally stable investment that continually increases in value. Compared to the stock market, which is a highly volatile investment, real estate is not prone to frequent market swings. Properties don’t immediately change in price based on capital contributions or political volatility, making real estate a safe and stable long-term investment.
The charts below visually show how the stock market and real estate market fluctuate and grow over time. Notice the peaks and valleys the stock market graph displays. While the real estate graph has fewer ups and downs, it grows steadily over time.
3.Protection From Inflation
While most people fear inflation, real estate investors don’t have to. One of the most valuable benefits of real estate investment in current markets is that properties are rarely impacted by the effects of inflation. Instead of being negatively impacted, real estate investments generally rise in value along with inflation. In fact, the graph below shows how home prices have stayed consistent along with inflation over the last three decades.
4.Rental Properties Provide Passive Income
When you invest in real estate, you open the door to generating passive income. Although there is still time, effort, and maintenance required, rental properties generally generate a regular monthly income, and property values naturally appreciate, even if you don’t make updates.
About 65% of rental property owners manage their own properties, which is the most affordable option. However, using the right property management software or service can help you spend less time managing rentals and even improve your ROI with outsourced or automated tenant communications and rent collection tools.You will be on a great start to build generational family wealth.