Do you have jitters about putting your money towards real estate? After-all, the media LOVES to talk about what tumultuous times we're in right now. Home prices falling! Buyers beware! Protect yourself!
Believe it or not, everything that you decide to do with your money involves risk whether it is in investing or just plainly depositing your bills under your mattress! Now you may probably wonder if it is smart to do "nothing" with your money, in this case, keeping it inside your home. You must know that your money is still not free from other forms of destruction like fire, flood, or even theft. Before you even know it, your hard-earned money is gone forever.
But, you say, what if I put my money in a bank safety-deposit box, won't THAT keep my money safe? Yes, it will keep the physical paper currency safe, but remember that the bills are only worth what the current value of the currency is. Over time the buying power of currency goes down (inflation!).
The annual rate of inflation in the United States hovers around 3% ("things" cost about 3% more every year). That means after one year of sitting in the secure bank box doing nothing, your money is worth 3% less. This wouldn't be called "saving" in my opinion; you're constantly losing purchasing power!
What about a savings account? These accounts are almost always protected by the FDIC (Federal Deposit Insurance Corporation) so there's not much risk of your bank going under and you losing your money, but again you're swimming upstream against the current of inflation. Even the best savings accounts out there barely give you enough interest to counteract inflation and often times inflation is outpacing your savings account interest earnings; but at least you're not losing AS much!
Stocks, some would say, are also promising. However, you should know that stocks investment is like investing in an "idea". How would you feel about owning something that is purely abstract: something you cannot hold or feel? In reality, what you really have is the fact that you allowed your money to be used by entities so that when they flourish, there will be a subsequent gain on the money you shelled out.
Relatively, you also hold no control on said "idea". Your chance of success cannot be told in advance either, since a number of factors that will come along the way have to be identified. Investing in stocks, I must say, can present a considerable amount of risk and can only be prevented if you decide to make it your profession or spend all your time doing research on the companies. This is the main reason why I am presenting the last and best option, the real estate.
Why? Real estate is a TANGIBLE item that is held very closely to you; you can see it, touch it, and improve it. There is very low risk that the physical investment itself will disappear, and even if it does, that's what insurance is for! (Try getting that for your stocks!) And unlike paper currency, the value of your property grows with inflation, so you're not losing purchasing power of your investment every year.
Another great thing about real estate is that money is made in multiple ways (these are too numerous to detail for the purpose of this article, but the benefits include huge tax breaks, gained equity through renter-paid debt reduction, equity gained through improvements, and appreciation). As stated in the beginning of the article, no investment is 100% safe, but it is my strong opinion that if done with some foresight, real estate is where you'll find the most bang for your buck as well as the most security for your money.
Alexandria P. Anderson is a licensed Minnesota Realtor that uses the Minneapolis real estate search to help her clients to find and purchase Minneapolis MN Homes and other Twin Cities properties.
