Why is Real Estate a safe investment

Posted by Lorraine Ross on February 6, 2008

At least since the last half of the 20th century, real estate has experienced a high rate of growth for investors. Unlike some other types of instruments, real estate is a safe investment and thus is quite popular with investors. It’s quite easy to see why real estate is a safe investment when you look around at the market in general. Real estate is one of the few investment instruments that you can depend upon to increase in value.

Unlike securities, it doesn’t change from day to day nor do you run the risk of losing all the money you have invested during a market crash. That doesn’t mean that real estate investors have never seen a depressed market because when you look at the late 70s and early 80s when interest rates on mortgages were at an all-time high of 18 to 22 percent, there was a definite decline in the rate of growth within the real estate market. This decline in property values was the direct result of a decrease in buyers—people just couldn’t afford mortgages with interest rates on mortgages higher than what they were paying on credit cards.

Once interest rates came down, there was an influx in the number of people rushing to refinance their high-interest rate mortgages while the decrease in interest rates caused home prices to rise again. Whenever interest rates are lower, you can depend on real estate prices to experience a high rate of growth. For the investor, this mean he or she can finance properties at a lower interest rate and make more profit.

The key to real estate investing is knowing when to buy and/or sell. If you follow the market, you will know when the best times are, and you can work around those. This assures that you make your purchase of real estate a safe investment as well as a profitable one. When you make your purchases when interest rates are low, and the real estate market is booming, you have more room for negotiation than you do when interest rates are high and prices are low.

Making a safe investment in real estate also means being careful where you purchase property. There is certainly no reason not to purchase a depressed property to renovate, but make sure you don’t purchase property in a depressed neighborhood. Making the purchase of real estate a safe investment means buying properties that have the potential to allow you to turn a profit, and buying in a depressed neighborhood doesn’t give you that opportunity.

Take plenty of time before you make a final decision about the investment property you want to purchase. Look carefully at the real estate you purchase to ensure that it is a safe investment. That means looking at property as well as the area to ensure your purchase of real estate is a safe investment. Never rush into a transaction and always make certain to negotiate the lowest price and best terms in order to assure you can turn the property into a profit-making venture.