Safe As Houses? Why Real Estate Is Still Number One For Parking Your Wealth

When you think of the super rich, what’s the first image that comes to mind? Usually, it’s stocks, cash, gold, yachts and bond certificates. 

In reality, though, it’s a little more prosaic. Most millionaires and billionaires put the lion’s share of their money into property. It’s as safe as houses, as the saying goes. 

In the past, real estate wasn’t nearly the market it is today. For most of the 20th century, prices tracked wages. As the economy became more productive, the value of houses went up, but not by more than that.

Then, in the mid-1990s, there was a decoupling. The price of real estate began rising faster than wages and prices in the rest of the economy. Now we’re in a situation where property values are many times what they were in the past, and it’s having a massive impact on people’s budgets. Rather than becoming a smaller share of their expenses, it’s getting larger. 

This trend is unlikely to reverse any time soon. The fed is toying with the idea of raising interest rates by 0.5 percent. That might cool inflation, but it’s unlikely to do much to douse the housing market. Right now, it’s just on fire. 

Properties Generate Year-Round Income

If you buy a stock in a company, your expected return is usually higher than real estate. However, stocks don’t provide you with cash flow. And they tend to be highly volatile. You’d like to believe that you’re getting a good return, but it takes many years to realize it. 

When you own property, though, you receive rental payments year-round. Combine multiple properties, and you can build a very healthy cash flow for yourself: thousands of dollars per month. 

Just make sure to legally shield that income because you never know when an insurer or homeowner’s association might decide to go after you for unpaid fees. Lots of property owners tend to find a closing attorney at debruinlawfirm.com who navigates them through these tricky legal bits. For instance, an attorney can help you establish a trust for investing in real estate and show you how to use it to reduce your liability.

Real Estate Continues To Appreciate

Added to this is the fact that real estate continues to appreciate and shows no sign of stopping. As long as central banks keep interest rates low, which they must to support the economy, house prices will keep rising for those who own them. In other words, you can rent out an appreciating property and net the difference between the purchasing and sale price when you come to sell it on. 

Once you understand your local market, you'll be able to create high-paying passive income around yourself. Riverside County residents living in Temecula are aware of their ever-growing community allowing them to find the right pieces to invest in. With new developments popping up every day, there is no shortage of real estate opportunities for investors.

Real Estate Is Low Risk

Finding investments with lower risk is a challenge these days. The combination of inflation, pandemics, and wars is now making the situation very tense for conventional investors. 

Real estate, though, seems largely unaffected because the forces determining the price are deep-seated. Things like limited supply, population pressure and capital flight are all making their impacts felt. 

Real Estate Offers Tax Breaks

There are also tax benefits to owning real estate. For instance, you don’t have to pay for gains from investment properties up to a specific allowance. For individuals, that’s $250k and for couples, it’s $500k, which is very generous indeed. 

What’s more, because it’s so cheap to take out a mortgage, many wealthy people simply collect properties as if they were cars or bottles of fine wine. Much of the time, you’re borrowing other people’s money, but getting the benefit of ownership yourself.