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Benefits of Real Estate Investment

After three years of recession and retrenchment in other parts of the economy, many investors are now seeking to diversify into relatively stable real estate investments -- notably single and multi-family properties in Sunbelt areas that are projected to maintain low vacancy rates and good future appreciation potential. The median price for a home in the U.S. today is $151,000, up 30% from five years ago. And existing-home sales are headed-up for a fourth straight record year.

On the whole, real estate still appears to be the investment vehicle most able to withstand a variety of unknowns. Many analysts believe that, even if the economy continues to falter, real estate remains the safest place to be. Because real estate has consistently outperformed other forms of investment, capital continues to flow into real estate from a variety of sources such as pension funds, foreign investment companies, and private investors, with the sum total approaching $90 billion. For the long-term, the housing market analysts believe that the �echo boom� generation�the nearly 80 million young people born between the early 1980s and 2002�has the potential to boost the apartment market in the years ahead, with demand particularly high for less expensive �class B� and �class C� space. Other positive demographic factors include a larger, healthier elderly population; more childless and �non-traditional� households; and more immigrants.
Such characteristics combine to make real estate investment a vehicle for stable returns. Real estate returns derive from on-going cash flows, as well as equity build-up due to loan principal pay down and potential appreciation.

The combination of leverage (e.g., 20% down payments), fixed-rate financing, and stability combine to provide investors with a combination of safety and �conservatism� while also having a fairly aggressive vehicle (due to the leverage). This combination of safety and high returns is unique to real estate and in the current economic climate, provides investors with a much-needed vehicle for capital investment.

Historical data bears out that residential real estate, over the long term, produce good returns with little downside risk. Since 1968 stocks, with dividends reinvested, have returned 10.7% a year on average; the median home price, meanwhile, has raised an average of 6.3% a year. For the majority of residential buyers who purchased property utilizing leverage from mortgages, the cash-on-cash returns, particular net of tax benefits, have been much higher than average returns from equities. Indeed, since the major housing organizations began keeping records in the 1960s, there has never been a year in which the average existing U.S. residence lost value.