16 Aug Investment in real estate
Franklin Roosevelt said:
Real estate cannot be lost, stolen, nor can it be taken away. When we buy it with common sense, pay it completly and manage it reasonably, it is the safest investment in the world.
Real estate investing is one of the most common forms of investment. Classic savings models are not attractive because the interest rate is lower than the inflation rate and thus the value of money is decreased. In other words, we call savings the process of actually losing money, or losing it at its real value. One of the most important features of real estate investment is its permanence, i.e.the impossibility of losing its original value, which represents the highest level of security. There are two ways how real estate can generate money:
(1) Income from real estate rental and (2) income generated as a difference between the purchase and sale price of the property. With revenue generated as the difference between the purchase and the sale price, time plays a crucial role, and the shorter the period between these two transactions, the potentially larger the difference, that is, profit. Of course, real estate can also be used for personal needs such as housing, but then we need to include in the calculation the cost of the missed opportunity(the so-called opportunity cost), that is, we need to ask ourselves whether it is more profitable to rent or live in a property we own. If the answer is negative, which means that it is more profitable to rent a property then to live in it, then the decision to live in it is not a good decision from an economic point of view. This approach has encouraged many tenants who are also owners of apartments or houses in city centres to rent them, and as a rule they move to less attractive parts of the city. The value of real estate, as well as of all other entities in the market is growing by creating an added value, which is most often achieved through a real, tangible investment contained in a visible change in the physical properties of the property. The constant creation of added value of the real estate influences the increasing value, which further ensures a potentially higher return on the invested assets. We can truly say that Franklin Roosevelt was right because with smart real estate investing you are entering the safest investment area in the world.