Real Estate VS Cash – What You Should Know

Written by Norfolk Capital

March 26, 2021

 

Once you’ve established a nest egg, you want to hold onto it. But, while keeping wealth in cash can feel like the safest move, there are a lot of potential downsides. In order to ensure that your money continues to grow and to sustain you, it is better to use a diversified investment strategy that includes assets like real estate. A few reasons real estate should be in your portfolio:

1. Real estate offers cash flow.

It’s hard to make money with just cash. Interest rates fell to 3.25%, the lowest rate since 2008. And, they aren’t likely to get much higher.

Real estate offers revenue from rental income, appreciation and, if you own a business on the property, any profits that are generated from that. Between these diverse sources, an investor is much more likely to make money with real estate than by putting money in the bank.

2. Real estate is a hedge against inflation.

Cash in the bank will, in real value, actually lose money over time to inflation. Real estate, on the other hand, increases in value as inflation occurs. Rents also increase over time as a natural part of inflation, meaning that your investment holds its value. 

3. Real estate has tax advantages that cash does not.

When you invest in real estate, there are a number of expenses that you can write off to lower your taxable income. Most costs associated with owning, managing and improving an investment property are considered deductible business expenses. There are also other tax advantages that knowledgeable investors can take advantage of, such as the ability to, in certain circumstances, defer capital gains. 

4. Real estate lets you leverage funds.

When people purchase real estate as an investment, they rarely do so with cash. Instead, they borrow funds that allow them to initiate the purchase. In the case of hard money lending, these funds are secured by the property itself and paid back over time through profits on the investment. The investor builds equity as they pay back the loan.

A diversified portfolio that includes a range of investments is the safest way to ensure that your money grows. Real estate investing has benefits that range from great returns to great protection from depreciation and inflation. By choosing the right properties at the right time, you can build your wealth while protecting what you own. And that’s money in the bank.

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