By Shelley Sakala
I am not a financial advisor – but I do know how to spot trends, and I’d like to think I’m wise enough to follow them. The people at Gallup have been studying long-term investment trends over the past decade, and the results have been interesting: 41% of Americans view real estate as the best long-term investment.
Here’s a breakdown of the responses received by a recent Gallup poll:
THE BEST LONG-TERM INVESTMENTS
Real Estate: 41%
Stocks/Mutual Funds: 26%
Savings Accounts/CDs: 9%
As for the reasons Americans are choosing real estate, some are obvious. The huge jump in home prices demonstrates how quickly a real estate investment can grow (Phoenix home prices grew more than 30% last year). Of all the investment options listed above, real estate is the only investment you can live in. Profitable as they may be, you can’t live inside bars of gold, barrels of oil, or pork belly futures. Plus, with real estate you can make money from your investment before it’s paid in full. That’s the benefit of having a mortgage—although you’ve only partially paid for your home, you can make profits from the entire home’s value. Suppose you had $100,000 to invest, and you were deciding between a savings account or real estate. To keep things apples-to-apples, we’ll say that each investment gave you the same 5% ROI (Return on Investment). Here’s how that would look in each situation:
Bank Savings Real Estate
Investment: Savings Account $500,000 house
Your investment amount: $100,000 $100,000 (down payment)
ROI: 5% (x $100,000) 5% (x $500,000)
Your profit: $5,000 $25,000
In a savings account, your profit is based on the money you invest. But in a house, your profit is based on the total value of your home.
To repeat the first line of the article: I am not a financial advisor. The best advice I can give you is to consult with one when planning your investment strategy. No investment is risk-free, and real estate will certainly have its ups and downs over the course of time. But I have no problem sharing information about the power of real estate as a long-term investment. It’s something worth considering as you plan your financial future.
Shelley Sakala is a local realtor and owner of The Sakala Group Real Estate. Learn more at shelleysakala.com.