Why Real Estate is the best Investment Globally?
When we have money, multiple options to invest come to mind. Such as investing in the stock market, forex or commodity trading, these days cryptocurrencies are another good option or you can simply put your money in the bank or mutual funds e.t,c. These are good ventures some of these may even be profitable but almost all of these investments have a high-risk aptitude. A successful and profitable venture is one that is driven by your passion. When you put your passion into something, it brings you joy and comfort and becomes a symbol of success for you. It keeps you motivated and you keep learning and investing in such an entity.
Real estate is easily the number one option for every investor. You will never find a person in any corner of the world that says he doesn’t have any interest or trust in real estate. Firstly, real estate is a necessity for every person in the modern-day, secondly, it is the most valuable physical asset and thirdly it comes with minimum risk.
Around 15 to 20 years ago, Kodak was worth billions of dollars but where is it today? Nokia used to rule the mobile phone world but now its share in the mobile industry in the world is negligible. There are so many examples of such businesses that could not adapt to the modern world and have disappeared now.
However, one entity that has been consistently performing for decades, centuries, and thousands of years now is real estate. Real estate is a proven tool to earn passive income with no risks involved. What’s even better is that you can enhance the profits from your real estate investments with good management just like any other business.
According to various researches around the world, real estate has been declared the no-1 passive income investment in the world. In almost all researches I studied real estate is placed at first or second place. There has not been even single research that has ranked real estate in the third position or below. All of their research has proven real estate to be a minimal risk investment. The wheel does not need to be reinvented now by either person/party as it is a proven fact by the top economic researchers of the world.
Have a look at this ranking by Financialsamurai.com, real estate is at No 2 and No 3, where the REC, REITs, etc are placed at no 2 which are real estate investments as well, and physical real estate has ranked at no3 with 45 score. The higher the score the better it is, risk in physical real estate is scored at 8 which is only second to putting your money in the bank. This is obviously in relation to the US Market because in the Pakistani market real estate will most certainly top the list.
Whether you are investing in a portfolio or passive income, real estate is the best and top investment in the world of businesses. You are not creating any more land and our population is increasing at a faster pace. In 1900, the world population was around one and half billion but just in a matter of 122 years in 2022, it is close to 8 billion and increasing exponentially. In the next 50 years, the population of the world is expected to be around 11 Billion.
Real estate is therefore a necessity as everyone needs shelter above their head.
A lot of people will beg to differ and believe that stocks may offer a better return. I strongly beg to differ, especially in the Pakistani market. Real estate especially rental real estate is the only option that can give you a 15 to 20% annual return without putting much at risk. It is a tangible physical asset and is suitable for every type of investor.
Every physical real estate investment you make puts you in charge as CEO. As CEO, you are able to make improvements, cut costs, raise rents, find better tenants, and market accordingly. Real estate is something you can see, feel, and utilize. Life is about living, and real estate can provide a higher quality of life. Given we’re all spending much more time in our homes due to the pandemic, the intrinsic value of the real estate has gone way up. When the world comes to an end, you can seek shelter in your property. Real estate is one of the three pillars for survival, the other two being food and health.
The most important factor in favor of real estate is that it is much simpler and easier for everyone to invest in. Real estate makes more millionaires than any other asset class around the globe.
One of the biggest flaws most investors make over time is speculation, one wrong decision can end up in bankruptcy for many. Bill Hwang, CEO of archegos, who lost 20Billion USD in 2 days is a classic example of such a debacle. Stocks which were the reason for his enormous riches turned out to be the reason for his ultimate debacle as well. You can read the complete story at Bloomberg.
The money that comes from such speculation in stocks follows a vicious cycle where you end up losing what you earned. The temptation finally takes over at some point and you risk it all.
Real estate on the other hand can be risky when you speculate but because of its tangible and physical nature, it will never be the reason for your bankruptcy. The best practice is therefore to actively manage your business and/or invest in nontangible assets for passive income while keeping at least 50% portfolio in rental properties and real estate.
Captain (Retd) Shahnawaz Yaqub Bhatti
Investment Consultant and CEO at Imlaak
Mob : +92 333 1616160 (WhatsApp)
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