How Property Became the Biggest Wealth Creator over the 21st Century

How Property Became the Biggest Wealth Creator over the 21st Century

Investing has always been a game of risks. When you invest in the stock market, you’re accepting a risk that the value of your stock may plummet with the hope that it will instead rise. As a result, many investors turn to alternative asset classes with more stability and a steady flow of income. This is where real estate has proven its worth within a diverse investment portfolio. As the demand for rentable housing has risen, so too has the potential earnings to be made by owning such housing. This has led to real estate investment becoming one of the largest wealth creators in the 21st Century. But what makes Real Estate so appealing?

Inflation:

Inflation is a major reason why properties become increasingly valuable over time and a consistent generator of high level of wealth. As the value of the currency falls over time, more money enters circulation. The price of goods and services rises as this value falls. This is how your grandparents could buy a meal for £1 in the past, whereas the same amount now has nowhere near the same purchasing power. While many people take this for granted and as part of everyday life, there is a huge potential for incredible wealth-building with the right person to harness it. Thus, properties are an excellent investment choice for anyone looking to build long-term wealth while safeguarding their cash against inflation.

This is possible in real estate because the majority of the big expenses associated with owning property, such as mortgage and property taxes, will remain fixed for the majority of the time you own it. This, together with rising rents and home values that come about with inflation, means that your potential earnings will only rise. If we know that inflation is likely to rise, why not invest in an asset class that will benefit from this?

Loan Pay Down:

When it comes to real estate investing, one of the best things about it is that you can use your tenants' rent money to pay back your loans, allowing you to make a profit from the very beginning. This is a huge advantage for investors, as not only are you earning money from your properties from the get-go, but you're also gradually retiring your loans and building up equity at the same time. This keeps you moving toward financial independence while also generating an increasing return on investment.

Appreciation: 

The majority of wealth in real estate wealth is created through appreciation. Appreciation is the gradual rise in the value of something, similar to inflation. While property prices have fluctuated over the years, there has been a general and consistent trend of increasing property values, which attracts many investors. This is how property investors end up with large sums of money when they sell their properties. This appreciation can then be combined with leverage to generate a massive ROI. When it's a safe bet that the value of a property will rise, it stands to reason that many people will use real estate as a source of steady income to offset the risk of other types of investment.

Forced Equity: 

This is a term used to describe the additional wealth that is created when an investor does something to improve their property. For example, if you buy a property with two bedrooms and one bathroom, you can force equity by building another bathroom and more bedrooms. This is ideal for investors who prefer a more hands-on approach to wealth creation.  Rather than being at the whim of the market to add value to your property, you can take an active role in increasing your cash flow and improving your overall investment portfolio.

With due diligence, it is entirely possible to purchase a property below market value that may require some repairs and turn it into a profitable investment. The trick is to look for properties with fewer amenities than ideal,, then add them to create value. The resulting forced equity can have a huge effect on your overall ROI.

The relative stability of the real estate market and its constant rise in value has led to it becoming the most profitable form of investment in the 20th Century. As long as people require housing, there will always be a market for real estate and opportunities for those with the right properties. It isn’t as vulnerable to short term fluctuations as the stock market because you have a real, tangible asset that will always be worth something. With all of this in mind, there’s no reason not to consider property as a worthwhile investment; it provides a consistent income with the potential for long-term growth.

About Us

Novyy is a Community Investing Platform that enables individuals to invest in UK Buy-To-Let, Leading Real Estate Private Equity Funds, and Premium Homes across Europe with as little as £10,000. Novyy users enjoy seamless digital investing like never before, in opportunities that were earlier unavailable to most individuals. This piece should not be construed as tax advice. Please refer to your tax advisor before making any decisions on owning properties through Limited Companies.