Belouis Investment Group | Alternative investments
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Alternative investments

31 Aug Alternative investments

When evaluating alternative investments, consider the potential benefits presented by real estate, beyond what may be obvious.

Compound interest

Compound interest is one of the reasons that real estate investment has such a significant appeal, and shows such credible returns. At its most basic, compound interest means that you consistently make money on the overall investment, not just the percentage you invested. Real estate presents the rural opportunity to leverage your money to such an extent that the value of the overall investment assists in achieving exponential growth.

Consider, you have $50,000 to invest. For that you can buy $50,000 worth of shares, $50,000 worth of precious metals, or thousand dollars worth of antique furniture that you hope will increase in value of the time. Translate that to the real estate market, and the numbers become much more interesting. Assuming you want to put down a 10% deposit on a property, then you can take your $50,000 and buy $500,000 worth of real estate.

To be fair, you can do the same with shares, but as many people learn during the global financial crisis, leveraging the stock market involves exposing yourself to, “margin calls,” which means that you are required to pay the entire amount of the loan should the shares slump below a certain level. In real estate, should the value of your property slump, you wait until it increases again.

Lifestyle Cost

Using $50,000 example again, if you choose to invest in the sharemarket, you will still be required to find a place to live and sleep. In other words, you will have to take into account when considering the investment, the additional costs you will incur as a result of rent. When purchasing property, your lifestyle is intertwined with your overall investment and as a result you can reduce your ongoing costs by including your mortgage payment in your analysis.

Improvements / Additional Leverage

In real estate, you can undertake improvements in order to increase the value of your investment. In fact, as the value of your property goes up you may be able to borrow against

the property to make those improvements – in other words, the investment itself will help you improve the value of the investment. Best of all, when you make improvements you can also enjoy them as part of your lifestyle, essentially making the way you live part of your overall investment strategy.

 

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