Financial Benefits of Residential Real Estate Investing
Residential real estate is a great investment option for a variety of reasons. Real estate in general is a stable investment that historically always appreciates, and typically provides a better return on investment than any other low-risk investment option. They’re also easier to manage than other investment types. Beyond the hype, though, what are the real financial benefits of residential real estate investing?
Residential Properties Appreciate
One of the biggest benefits of investing in residential real estate is that it appreciates in value. Residential real estate can provide a double-digit return on investment, and tends to appreciate more the longer you hold it. In some high-development areas, property values can appreciate as much as 100% if you buy in the right place at the right time. More commonly, real estate values appreciate five to nine percent per year, depending on where you live.
During the last 40 years, real estate values had an average national appreciation rate of 5.4 percent, but appreciation was 9 percent in some states, and higher in some high-appreciating local markets. While real estate appreciation does vary, it tends to be higher than other traditional low-risk investments, and it can yield amazing returns if you buy in the right place at the right time.
Residential Real Estate Provides Cash Flow
When you invest in residential real estate as a rental property, you also have the benefits of cash flow and equity. Unlike a home, which is a drain on the finances every month, residential rental properties actually produce income every month. You’ll need to use a portion of that income to pay the mortgage, taxes and insurance, and you’ll have to put some aside for maintenance and upkeep, but rental properties can still provide a modest cash flow; which can increase as you add more properties. Residential real estate can also provide a source of equity if you ever need a bigger loan for improvements, buying new properties or other financial needs.
