By: Justin Udy
When I was a kid, I remember taking pennies and individually burying them in the backyard. It was safe, close to the house, and exciting because no one knew where they were hidden. Unfortunately, that included me.
I was heartbroken when I would go back weeks later, only to not ever be able to find the location of my treasure. My pennies were all gone! (And my Gi-Joe’s, but that’s for another story).
Burying your treasure may not be the best idea to protect your wealth. Markets are cyclical and keeping your money safe can be a challenge. However, real estate can protect your wealth like no other method. Consider these 5 ways that real estate may be the absolute best way for you to protect your wealth:
1. Best Hedge Against Inflation. Inflation is the decrease in the value of money. If the dollar devalues and wages remain stagnant, real estate allows you to ride the inflation cycle. You will find rent rates rise, even in an inflating market. In addition, the equity in your real estate increases over time. Real estate therefore helps you gain during times of rising prices.
2. Forced Savings Plans: We all know that saving money is much easier said than done. Real estate provides you with a forced savings plan. Month after month, year after year, your mortgage balance slowly goes down. Every payment you make or payment your tenant makes, a certain dollar amount goes directly toward paying down the property. In an economy that may be tough to save money, real estate offers refuge and a structure that creates a large piggy bank that gets fatter and fatter over time.
3. Steady and Increasing Income Stream. Statistically, rents have continued to increase for decades History teaches us that the longer you own property, the more equity and increasing rent you make over time. Real estate allows you to have consistent growing income, as opposed to a fixed one. Holding property can be a safe haven and increase your income dramatically over time.
4. Tax Savings. Over time, chances are you will make more money and eventually fall into a higher tax bracket. Breaking into a new tax bracket can affect your actual net. Owning real estate provides the opportunity to influence your tax liability each year. (Talk to your accountant for more details- be sure to ask her about depreciation!)
5. Low Volatility. Other markets tend to have much larger fluctuations in times of trouble. Think, for example, about stock market crashes such as Black Friday. Real estate, however, tends to change slowly over time. It is not impacted as harshly as other types of investments.
Real estate helps you resist the penetration of any market conditions, helps with cash flow, increases savings, and builds you an asset that continues to grow.
Taking these factors into account, the benefits of buying and owning real estate may very well be your best bet.