Real Estate Investing Proven Reasons for Making Investments With low interest rates being offered on many savings products (bonds, savings accounts, term investments, etc. ) and the volatility of the stock market, traditional investment vehicles may not be sufficient to save for your long term goals. Some investors are taking comfort in the diversification offered by real estate investments. Investing in real estate, however, can be a tricky business, and like the stock market, every investment will not be a great one. As a matter of fact, what makes a great real estate investment is keyed as much to timing and interest rates as it is to the true operating costs of a property. When it comes to evaluating investment opportunities, below are advantages of real estate to consider: Stock Market Volatility As we’ve seen in the last several years, the stock market is extremely volatile and unpredictable. In recent years, many investors have fled the once profitable stock market in search of a less volatile and more lucrative means of increasing capital. In the United States, more millionaires have gained their riches from real estate than from all other means combined. Profits from real property investments can be realized in a variety of different ways: Positive cash flow earned by collecting rents Tax benefits Appreciation of the property's value Refinancing and borrowing on the accumulated equity Return on Investment Let a tenant help you build equity. Having a tenant pay your rent may help offset the cost of the mortgage while still enabling you to build equity on your investment. Long Term Equity Investing in real estate is often a good way to build long term equity. Real estate values have experienced a steady increase in value for the last several years. This appreciation is due to the overwhelming demand for real estate. Besides serving as a basic human need for shelter that everyone must satisfy, several other factors are working to increase the demand for real estate, such as risk, liquidity and leverage. Lower and More Manageable Risk Depending on the type of property you purchase, Maine real estate may offer you a more manageable risk then some other investment vehicles. Potential investors should study different areas and types of property to determine the differing levels of risk presented. Residential, rent-producing properties tend to be the lowest risk because of the number of renters available. Real estate financing gives buyers the ability to purchase property while someone else (your tenant) makes the payments. When the value of the property appreciates, the investor gains equity and can make money using their financed funds for other projects; that is, take money out of your property and use it to buy more property. And all of this can be done without paying taxes since this type of reinvestment is not considered a taxable gain. Supplemental Income Investing in Real Estate may enable you to supplement your income for large expenses like education of your children or savings for your own retirement. Diversify, Diversify, Diversify - Good financial planning involves using many financial products. Real Estate may be a good means of diversifying your portfolio. Leverage Leverage basically allows you to use other people's money to buy properties. Real estate investors use leverage to increase their purchasing power and finance investments that they cannot pay for otherwise. Leverage also allows investors to earn a higher return on their equity. For example, leverage allows you to buy a $1 million property with only $200,000 down. How else could you buy a million dollar asset for 20% down? Try duplicating this type of purchase with your company's 401(k) program or buying stocks in the stock market. You just don't have the same type of leverage that you do with real estate. Robust Rental Market Portland is one of the largest cities in Maine and the economic engine of the state. It is a competitive rental market with less than 5% vacancies. Reduce Tax Liability Claiming property related expenses and the interest on the mortgages may help offset the taxes owned on your regular source of income. However, as with any investment, it is important to take all the factors (both positive and negative) into consideration when making your decision. Speak with knowledgeable, trusted and experienced real estate professionals to enhance your chances of success.