In 2008 and 2009, many individuals felt that the implosion in real estate was something long term which would have consequences lasting for decades. However, in spite of these corrections in prices, the market has rebounded 20% since this time. (“After 8 Years,” 2014) This is because various properties are selling at discount relative to supply and demand inside key markets.
The factors which make a good investment include: the tremendous amounts of flexibility it provides. For instance, a property could be leased to generate income until the market prices recover. At the same time, it receives favorable tax treatment with mortgage interest, improvements and depreciation being written off. Moreover, capital gains can be avoided through what is known as a 1031 exchange. These factors mean that real estate can produce a more consistent return and offers a number of benefits in contrast with other choices. (Eldred, 2012)
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There are number of different real estate vehicles which exist. The most notable include: real estate investment trusts (REITs), limited partnerships, commercial / residential properties, and raw land. REITs allow an individual to purchase a portfolio of real estate and buy / sell it similar to a stock. This will generate income in the form of dividends and capital appreciation. Limited partnerships allow someone to realize depreciation and the potential to create passive income. Commercial and residential properties can be used to: generate income, for write offs or to realize an increase in appreciation. Raw land can help to build income, it receives favorable tax treatment for depreciation and could realize long term increases in value. (Eldred, 2012)
Real estate can be purchased as a part of an equity or investment portfolio. For instance, two avenues which can achieve these objectives is to buy REITs or limited partnerships. This will increase the overall returns, provide income and offer favorable tax status for sophisticated investors. (Eldred, 2012)
- After 8 Years. (2014). Fortune. Retrieved from: http://fortune.com/2014/03/31/after-8-years-the-real-estate-market-is-finally-looking- normal-again/
- Eldred, G. (2012). Investing in Real Estate. Hoboken, NJ: Wiley.
