How Real Estate is the Fastest Way to Reach Financial Independence
Are you bored of your nine-to-five job? Do you struggle to make time for your family and friends? Well then, why not quit? We know you might think that it’s a bizarre idea and can put you into serious financial trouble. The truth is, however, depending on where and how you spend your money, you can generate passive income. The real estate industry especially allows you to earn a passive income by staying at your home, without having to take up monotonous challenges of your everyday nine-to-five.
Real estate investment offers you financial independence that can allow you add up your savings without actually doing any hard labor. Though you have to put a bit of energy and time into creating a real estate portfolio, once you are done, you can relax and peacefully enjoy your retirement. You can also go on adventurous trips that you have always wanted or follow your passion that you once left behind to work on your career.
Read the article further to learn how real estate gives you financial independence and why you must choose it over other investment options.
What is Financial Independence?
Financial independence refers to a point of financial independence when you no longer depend on regular income generated from any type of job. Instead of getting income from a monotonous and tedious nine-to-five job, financially independent people can meet their day-to-day needs with a passive income.
This means you will have a portfolio of assets that you will attain over time and use to generate income that is more or, at least, equal to your expenses. Being financially free allows people to spend more time with their friends and family. It will allow them to follow their passion and interests with ease. But most importantly, financial independence allows people to not worry about their future or retirement, giving them the protection they need. Before you reach financial independence, you need to plan for it and save enough money to invest in various assets. For instance, you can use Personal Capital to create a personalized plan that will help you gather investment.
How does Real Estate Offers Financial Independence?
People have always considered real estate investment the ideal way to earn a profit over a longer time. But few people know that real estate offers a high rate of return on investment than any other investment opportunity, such as bonds. Many studies indicate that real estate has always offered great investment opportunities for investors. Wondering how? Real estate investments offer profits in different ways. First, when you invest in a property, you will enjoy the profits your asset will appreciate over time. Besides that, you can rent out your property, which will help you generate regular income through rent.
Additionally, commercial and residential real estate are the most familiar forms of investment for most people. This investment option is fairly easy to break into. Many people grow up hearing and discussing the rising cost of properties. Therefore, it’s much easier to understand than the stock market or bonds. So, even with little knowledge about real estate, you can purchase properties and start earning a profit.
Finally, opting for real estate for financial independence gives you complete control over your investment portfolio. You can control all aspects of the investment compared to CDs or stocks. When you purchase a property, you can decide when or who you want to buy or sell your property to. It might seem intimidating for many people, but being in charge of your investment saves you from several issues like taking professional help to decide when to purchase or sell stock.
Which Type of Investment Gives You More Financial Independence?
While several types of investment opportunities can give you financial freedom, not all of them work for you. Some require you to continuously stay involved in the specific market to learn about the changes. Others require you to take professional help to make better decisions. Real estate, competitively with others, saves you from issues you have to deal with in other types of investments. Read further to get an idea of how real estate is the better option for investors who want to peacefully retire.
Real Estate Vs. Stock
Stocks are highly liquid, so you can easily sell or purchase them anytime. Also, it’s easier to know the value of your stocks whenever you want. Stocks are also easier to diversify than other assets. You can build a broad portfolio of industries and companies in less time and effort than real estate. Investors can buy shares in index funds, mutual funds, or exchange-traded funds. Another reason an investor chooses to invest in stocks is that there is zero trading cost. If you want, you can grow your stock investment in retirement accounts. Acquiring shares through a retirement account, like an individual retirement account or 401 (K), can help you grow tax-free or tax-deferred investments.
Despite offering you all these benefits, stocks have several drawbacks, making real estate a better option for investors. Many investors choose real estate over shares because they are more volatile than the commercial or residential real estate market. The aspect of volatility may lead you to lose your money unless you take a long view before purchasing stocks.
Selling stocks requires you to pay capital gains tax. While you need to pay lower taxes if you have keep stocks for more than a year, most people sell them before a year when they get a good price. In the case of real estate, the tax you have to pay against the profit you gain soon after you purchase the property is low. While you can purchase or sell stocks, it doesn’t mean you should. You need to take your time and do deep research about the market before making any decision. However, when you purchase real estate, you don’t have to invest your time and effort yet enjoy a passive income.
Real Estate Vs. Bonds
Bonds are another common choice of investors. They choose between municipal, corporate, and government bonds. When you purchase bonds, you earn interest once they mature. Many people choose bonds because they are low risk, making them a reliable option for investors. However, anyone looking for a high return on investment and greater financial independence may find bonds to be an attractive opportunity. The returns from bonds can significantly fluctuate because of factors like inflation. Real estate, on the other hand, offers greater returns during inflation. Since labor and material cost rise in inflation with rent, real estate prices also go up.
Another important thing to consider before choosing bonds is capital gain taxes. Depending on how long ago you acquired a bond, you will be subject to capital gain and income taxes on its return. Real estate also entitles you to tax deductions, saving your money. Finally, while bonds have low risk, they don’t offer you a significant amount of return, which can make them a less lucrative investment to have in your portfolio. Investing in real estate saves you from risk and allows you to generate steady cash flow through rent.
In a nutshell, reaching financial independence is possible if you choose the right investment opportunity. Make sure that you have enough money to invest in real estate. Also, look for properties that offer greater profits, such as properties in a location with higher rent. If you’re confused, it’s better to get help from experts who can help you evaluate this option.
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