When it comes to investing, the idea of getting a higher percentage return from treasury investments right now is pretty attractive. The simplicity and lower entry barriers associated with investing in treasuries make it an appealing option for many. We understand the attraction – however, there are more complex factors worth considering. 

At Cornerstone Commercial Investments, we’ve spoken with many seniors who wish they could go back in time and change their retirement investments. Many of these individuals, who had opted for treasuries or quicker, more liquid investments earlier in life, now regret it. Why do they regret these choices?

Real estate, in particular, has some unique advantages beyond what most other investments offer. If you’re wondering why you should consider investing in real estate instead of sticking with the tempting returns from treasuries, let’s look at the many benefits investment properties can give you.

Cash Flow: Generating Passive Income

One of the most compelling rationales for delving into real estate investment is its potential to generate consistent cash flow. This passive income is a reliable source of financial stability, complementing your regular earnings. Unlike Treasuries with fixed cash returns, real estate rents can escalate, transforming it into a wealth-building strategy with a comparable floor and a significantly higher ceiling.

A Buffer Against Market Turbulence

Unlike stocks and other securities that can be swiftly converted to cash, real estate, consisting of land and buildings, lacks this immediacy. This characteristic serves as a buffer against impulsive selling in real estate, allowing investors to weather the storm during periods of volatility in the securities market. Without thoughtfully chosen real estate assets to diversify risk within a portfolio, even minor downturns in the market can lead to substantial losses for investors. This unique aspect of real estate adds a layer of stability and resilience, allowing investors to navigate uncertainties with a more humane and measured approach.

Tax Advantages: Leveraging Depreciation and Deductions

Investment properties harbor substantial tax advantages that Treasuries cannot rival. Depreciation is a potent tool, enabling you to deduct a portion of the property’s value from your taxable income, thereby diminishing your overall tax liability. Furthermore, expenses associated with property upkeep, repairs, and management are deductible, providing additional relief on your tax burden. These advantages can substantially augment your after-tax returns in contrast to Treasuries.

Many are unaware that the US government employs tax incentives as a tool for fostering economic growth. These incentives are provided to businesses for job creation, real estate investors for affordable workforce housing, and in sectors like oil and gas exploration, farming, agriculture, and green energy. The tax code is intended to stimulate various aspects of the economy.

Hedge Against Inflation: Safeguarding Your Purchasing Power

Real estate serves as a surefire hedge against inflation. As the cost of living escalates, rental rates and property values often follow suit. Unlike fixed-rate Treasuries that may struggle to keep pace with inflation, real estate investments have the potential to preserve and even enhance your purchasing power over time.

Inflation erodes people’s wealth, contributing significantly to the widening wealth gap in the country. Educated investors flourish by meticulously selecting investments that consistently outperform the inflation rate. They employ leverage and hedging strategies, mirroring the practices employed by banks in arbitrage. These savvy investors adeptly engage in the banking game, borrowing money from banks at fixed rates to acquire cash-flowing assets.

Appreciation: Cultivating Equity Over Time

While Treasuries offer a fixed interest rate, real estate boasts the potential for significant appreciation over time. Property values typically rise with the growing demand for real estate, contributing to equity accrual. By strategically investing in well-located properties and capitalizing on market trends, you stand to benefit from capital appreciation, potentially reaping substantial gains upon selling.

Debt Pay Down: Tenants Contributing to Your Equity

Investment real estate introduces a unique prospect where someone else—your tenants—contributes to building your equity. Rental income not only covers property expenses but also aids in mortgage repayment. This gradual reduction of debt over time means that you increasingly increasingly own the property. Even if the asset’s value remains constant, having tenants contribute to debt repayment can propel you into a more favorable financial position.

Before making any investment decisions, meticulous research, an evaluation of risk tolerance, and consultations with financial professionals are essential to ensure that your investment strategy aligns with your goals and circumstances. While Treasuries offer predictability, real estate presents a dynamic and potentially more lucrative path to building and preserving your wealth.