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Top 5 Benefits of Real Estate Investment

Published on September 02, 2024

Real estate is one of the best ways to build wealth. There’s a very high chance of generating a significant return, and you don't need as much capital to get started compared to other investment strategies.

In this guide, we'll explore why real estate is a key component in the portfolios of smart investors. You'll discover the advantages of buying property and how it can help you grow your wealth.

1. Appreciation Over Time

A key advantage of real estate investment is the potential for property appreciation. Real estate tends to appreciate in value over time.

For example, the Middle East real estate market is expected to grow at a CAGR of 6.1% between 2023 and 2030. In the U.S., home prices have risen consistently for 11 consecutive years, achieving an 18% increase in 2021 alone.

Freddie Mac House Price Index price appreciation from 1990 to 2023:

The residential or commercial property you purchase today will likely be worth significantly more in the future.

2.Use Leverage to Build Wealth

Investing in real estate allows you to use leverage to build wealth. You can fund the purchase of a property with borrowed capital. This allows you to control a large asset for a relatively small upfront investment.

As the property appreciates in value, your returns can be much bigger than your initial outlay. For example, a real estate investor could put down a 20% deposit on a property and still benefit from the entire property's appreciation, not just the portion paid for in cash.

3.Protect Your Wealth From Inflation

Investing in real estate can offset the impact of inflation on your investment portfolio. A Ton Duc Thang University study found that real estate investments effectively hedge against inflation, outperforming gold and stocks.

While other investments are hit by inflation, the value of real estate investments increases in real terms. You’ll usually be able to adjust rent prices to match the rate of inflation, and the property's value is also likely to appreciate faster as demand for assets increases.

4.Diversify Your Portfolio

A diversified investment portfolio is a smart way to manage risk. You spread your investments across different asset types so that you're not overly reliant on any single one.

Real estate can be a key part of this investment strategy. A study published in the Journal of Real Estate Research found that adding real estate to a mixed-asset portfolio can reduce risk by 10% to 20%.

5.Earn Passive Income

The potential to generate passive income is one of the biggest benefits of real estate investing. The rent paid by your tenants can provide a reliable stream of income with minimal ongoing effort.

In a recent Deloitte survey, industry leaders ranked single-family rentals (SFRs) and build-to-rent (BTR) properties as some of the most attractive investment opportunities for the next 12 to 18 months.

Another great option for passive income is Real Estate Investment Trusts (REITs). By buying shares in a real estate investment trust, you can earn regular dividends without the need to manage properties yourself.

Conclusion

Real estate is one of the most reliable ways to build wealth and create a lasting legacy. If you want to learn more about real estate investment strategies, book your place at Cityscape Global 2024. The world's largest real estate event takes place in Riyadh, Saudi Arabia, Nov 11-14, 2024.

You'll have the chance to learn directly from industry experts and discover the latest strategies and tools for building and managing your portfolio. Unlock the full potential of real estate investment at Cityscape Global.