Why Real Estate is the Best Investment a Consumer Can Make!

In a time when the financial market is so volatile, investing in real estate is one of the smartest moves a consumer can make. Whether it be purchasing a primary residence or a property for investment as a rental unit, one would be wise in taking advantage of the opportunity to own real property.
First of all, real estate is tangible. You can touch it, feel it, possess it. This cannot be said for stocks or bonds. However, that is not to say that one should cash in all of their intangible financial investments and buy up all the property they can find; rather, investing in real estate is a fantastic way to diversify your portfolio. And if you are purchasing your primary residence, it serves a dual purpose of providing a roof over your head, which is a basic need that every person requires anyway!
Secondly, real property generally increases in value over time. Over the last three decades, the median sales price for a home has increased an average of 3% to 6% each year (“Why Home Ownership is Worth It,” Alabama Homebuilder, Summer 2008). Therefore, as long as one owns his or her property for long enough to gain some equity then the odds are in his favor that a financial gain will be made at the time of sale.
Thirdly, interest rates are still at all-time lows. I, as well as a few agents in my office that have been in the business long enough, remember interest rates reaching well into double-digits in the 1980’s. Just the other day, when we were on property tour, one of these more seasoned agents pointed to a house and said, “I sold that house at a 17% interest rate in the 80’s.” How remarkable! With rates fluctuating between 5% and 7%, a consumer should be jumping at the chance to purchase real property. Just to be clear, this is not to say that now is a bad time to sell either. On the contrary, depending on the equity you have in your home and how long you have owned it, you still stand to gain a profit; and, if you turn around and reinvest this money in other real estate then you will continue to reap the benefits of real estate investment in the future.
Fourthly, knowing your fixed costs helps you budget. Landlords are free to raise rent regularly, whereas if you have a fixed-rate mortgage your payments will stay the same throughout the life of the loan. Therefore as your income increases over the years you won’t have to worry about paying more for your home and can make better use of your disposable income in other ways.
Lastly, home owners are afforded tax breaks. In general, property taxes and the interest on one’s mortgage payment can be deducted from one’s taxable income. Also, in Alabama if one resides in the property for two out of five years, when he or she (or they) sells the property the profit made from the sale is tax-free (when the value of the home is up to $250,000 singly or $500,000 jointly).