No investment portfolio is complete without lucrative and secure long term rentals.
Where do I invest?
How do I invest?
Why should I invest?
…Maybe I’ll just put my money in the farm back home?
These are all questions many of our investors think about each day.
As responsible individuals, they care about how their hard-earned savings can work for them and maximize a return on investment (ROI) so they can relax in knowing the financial future of them and their families are well taken care of.
Here at Bostwick Investments we are excited to serve our clientele in both a professional and ethical manner, and help our investors increase their wealth. We believe that trust is the most important ingredient in an investment relationship, and as such, here are the top five reasons why we believe in real estate investment!
Real Estate Pays Good Cash-on-Cash Return on Investment
When you buy property you take money from liquid financial assets (stocks, bonds, CDs, currencies) and invest them into a tangible ‘illiquid’ asset–real estate. At minimum, and you strive to earn a fair cash-on-cash rate of return on your real estate through purchasing cash flow-positive properties that earn you decent returns – not those prize properties that may seem superficially enticing but lead to intrinsically negative returns. For more guidance on this, see Smart Investing – A Tale of Two Townhomes.
Real Estate Isn’t Too Risky of an Investment
Investments of any kind, including real estate, has a degree of risk. Development of real estate, land, Tenant-In-Common (TIC) investments, private real estate funds, fixer uppers, etc., all have higher risk profiles than just simply buying a nice established cash flow investment property. As we do all of the proper due diligence, vetting, analyzing, testing, and reviewing property and neighborhood data and trends our properties have a lower risk profile than any other investment properties.
Doesn’t Require a Lot of Time or Managing
Some properties require too much time and management to make them smart investments. Examples include vacation rentals, run down properties in bad areas, off-campus student housing, etc. Properties in nice neighborhoods which are rented to tenants with good credit logically require the least time to manage and maintain therefore providing a greater overall return.
High Tangible Asset Value
Unlike stocks and bonds, an investment in real estate is backed by a high level of brick and mortar. This helps reduce the principal-agent conflict, or the extent to which the interest of the investor is dependent on the integrity and competence of managers and debtors. Even through real estate investment trusts (REITs), or securities, investors who although don’t tangibly own actual real estate nonetheless enjoy regulations that mandate a minimum percentage of profits be paid out as dividends.
Attractive and Stable Income Return
A key feature of real estate investment is the significant proportion of total return accruing from rental income over the long term. Over a 30 year period from 1977 to 2007, close to 80% of total U.S. real estate return was derived from income flows (i.e. rental income). This helps reduce volatility as investments that rely more on income return, tend to be less volatile than those that rely more on capital value return (i.e. buy and flip).
Despite low mortgage rates, home ownership is unfortunately a distant dream for many Americans still recovering from the financial crash. As a result, more people are living in rental accommodations. With demand driving up costs, rental prices are at an all-time high. This spike in demand is highly beneficial for property investors who will see their investments appreciate, as well as earning steady monthly returns. For example from 2012-2014 Blackstone Capital spent $8.6 billion dollars on housing (48,000+ homes) to hold and rent. For more, check out Take Advantage of a Housing Crisis – Rent!
People Prefer Houses to Apartments
Right or wrong, there is often a stigma associated with finding an apartment for rent. If someone has owned a home, they might see it as a step backwards to move into an apartment. This creates a great opportunity for you as a real estate investor. Also, those who have owned homes prior generally will make better tenants because they tend to treat rental homes as they are used to treating their own home.
Another benefit of investing in real estate is its diversification potential. Real estate has a low, and in some cases, negative, correlation with other major asset classes. This means the addition of real estate to a portfolio of diversified assets can lower portfolio volatility and provide a higher return per unit of risk. Moreover through our platform you can invest as little or as much as you’d like in many different properties to further diversify while increasing ROI and mitigating risk.
The inflation hedging capability of real estate, stems from the positive relationship between GDP growth and demand for real estate. As economies expand, the demand for real estate drives rents higher which in turn translates into higher capital values. Therefore, real estate tends to maintain the purchasing power of capital, by passing some of the inflationary pressure on to tenants and by incorporating some of the inflationary pressure, in the form of capital appreciation.
By investing with Bostwick you are investing in community building. Real estate is uniquely REAL because you’re helping others live, work, play, and in turn contribute to their community. In other words; the projects are physical. When you invest in real estate, your future is in the bricks and floorboards of a building that can last – and bring in cash flow – for decades. Real estate investing is a truly participatory way to make money. Rather than counting on an interest rate and corporate gains, profits from real estate are generated by human interaction, growth, and development.
Rental Properties: Evaluating Risks and Rewards
For more information, please watch the video below to develop a better understanding as to exactly why you should have rental properties in your investment portfolio, and why it is the key to a secure financial future. Rental properties are the key to long-term financial growth and retention.
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