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Is Residential Real Estate a Good Investment?
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Is Residential Real Estate a Good Investment?


Residential real estate investing has slowly become the preferred strategy of ambitious individuals who are looking to capitalize on the current positive economic trends. The relatively low capital requirements of the venture coupled with the ease with which these assets can be managed have made residential properties an extremely popular investment. But should you really invest in residential real estate in 2020? And is buying rental property a wise decision given the current market environment? In this article, we will make the case for why real estate is a good investment and outline a few points that should motivate you to get started in residential real estate investing.

What Makes Residential Real Estate Such a Good Investment?

The advantages that a residential real estate investment offers are quite numerous. In fact, the low barrier to entry is only one of the many pros associated with this investment strategy. Here are some of the factors that should get you to start investing in residential real estate.

1- Residential real estate generates high and reliable cash flow

The most obvious advantage of residential real estate is the sheer amount of cash flow that it could potentially generate. Unlike other types of businesses, the income from a residential property is relatively predictable and stable. In fact, residential properties are evergreen assets and demand for them has only increased over the years. As long as you get your investment property analysis right and keep expenses under control, you will be able to generate positive cash flow in a matter of weeks.

Another great thing about owning rental property is the fact that the cash flow can be utilized in a wide range of ways. For example, you can put the extra cash towards another business, a retirement nest egg, or you can simply live off the passive income for years to come.

2- It comes with a myriad of tax benefits

Real estate taxation is another factor that sets this venture apart from other types of investing. It is important to note that real estate investors are offered a host of tax advantages that are not available to other investors. The main examples of such benefits include the ability to deduct most operating expenses, not subjecting rental income to self-employment tax, and a substantially lower tax rate for profits generated through long term rental properties. In simple terms, the tax bill from a residential real estate business will always be lower than in other sectors.

3- Real estate is the ideal hedge against inflation

Nothing tanks investments faster than inflation. Almost every business that you could invest in can potentially be affected by a sudden spike in inflation rates. One of the few exceptions is residential real estate investing. As prices increase, so will rental rates and property value. In fact, inflation might actually increase your cash flow all the while your expenses and mortgage payments remain low.

Related: Punch Inflation in the Face with Real Estate Investments

4- It offers investors more than one way to earn a profit

Another reason why a residential rental property is a good investment is the dual profit potential that it offers investors. Besides rental income, owning a rental property allows you to profit from appreciation as well. This is an incremental increase in property value that occurs on a yearly basis. Even if your primary focus is rental income, appreciation will help you achieve a higher return on investment without requiring any effort on your part.

Related: How to Calculate Real Estate Appreciation

5- You have full control over your real estate business

Few investments grant you the same level of control as residential real estate. As a property owner, you are fully in charge of every aspect of your business. Everything from tenant screening to implementing strategies is under your responsibility. As a result, the success of the venture is entirely dependent on your own effort and abilities. This is in stark contrast with other investments such as stocks, bonds, and company equity. When investing in the latter, you are beholden to the whims and decisions of CEOs, executives, and board members.

6- It is an easily scalable business

Scalability is crucial to taking your business to the next level. While a business that is built around tangible assets might seem difficult to scale, this could not be further from the truth. In fact, scaling up a residential real estate business is relatively simple. As long as you put any cash you make towards improving the investment property or acquiring other residential assets, your business will begin to grow in a steady manner.

Related: How to Buy Multiple Rental Properties in a Single Year

Now that you are familiar with the main advantages of investing in real estate, let’s delve into how to find residential real estate in the US housing market 2020.

The Best Way to Find Residential Properties in 2020

Identifying profitable investment properties is the key to success in residential real estate. Fortunately, finding such properties has never been easier. Thanks to the tools that Mashvisor puts at your disposal, you will be able to zero-in on the ideal investments in a matter of minutes. Here is a brief look at how you can leverage these tools to your advantage:

  • The Real Estate Heatmap: This tool enables real estate investors to identify neighborhoods with the most profitable investment properties. It employs a combination of visual cues and neighborhood data in a way that makes property search a fast and interactive process.
  • The Property Finder: This is an advanced search engine that utilizes the latest in AI and machine learning technologies. This tool is specifically designed to find high return listings that match your criteria.
  • The Mashvisor Property Marketplace: Off market listings are an untapped source of undervalued properties. By heading to this marketplace, you will gain access to hundreds of profitable investments that are outside the confines of the MLS.

Start your 7-day free trial with Mashvisor and subscribe to our services with a 20% discount after.

The Bottom Line

As you can see, residential real estate will continue to be an attractive investment in 2020 and beyond. As long as you set your goals at the beginning and implement a strategy that is in line with your level of experience, you should be able to see a good return on your investment.

To start looking for and analyzing the best residential investment properties in your city and neighborhood of choice, click here.

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Yassine Ugazu

Yassine is a versatile content writer who enjoys crafting compelling copies and articles about the various facets of real estate.

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