Survey Shows Real Estate Is Americans' Favorite Long-Term Investment (2024)

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Survey Shows Real Estate Is Americans' Favorite Long-Term Investment? ›

Gallup found more Americans identified real estate as the best long-term investment compared to other types of assets. Gold jumped in popularity this year with 26% of respondents identifying it as the best long-term investment, up from 15% in 2022. Just 4% voted for crypto, down from 8% in 2022.

Gallup found more Americans identified real estate as the best long-term investment compared to other types of assets. Gold jumped in popularity this year with 26% of respondents identifying it as the best long-term investment, up from 15% in 2022. Just 4% voted for crypto, down from 8% in 2022.

In 2022, the No. 1 action Americans took to build wealth, stated by 27% of respondents, was investing in the stock market. Just 12% invested in real estate.

3. Long-Term Security. Real estate is a long-term investment, meaning you can hold it for several years as you wait for it to appreciate. At the same time, if you rent out your real estate you can earn monthly income while you wait for your property's value to rise.

Still, at least by this poll, real estate's popularity may be down but it's still a long-standing mainstay. This year's 34% best-investment share is above the average 32% poll results since 2011 – ranking real estate No. 1 in the long term.

Some of the most successful entrepreneurs in the world have built their wealth through real estate. In fact, it's estimated that 90% of all millionaires invest in some form of real estate. There are several reasons for this, but in today's article, we'll share seven reasons why millionaires invest in real estate.

It gives your money more time to potentially grow

The longer you remain invested, the more time your money could have to potentially grow. You'll do this through the power of compound returns.

Federal tax benefits

Because of the many tax benefits, real estate investors often end up paying less taxes overall even as they are bringing in more income. This is why many millionaires invest in real estate. Not only does it make you money, but it allows you to keep a lot more of the money you make.

Only 3% of American millionaires received an inheritance of $1 million or above. Real estate makes up about 40% of a typical millionaire's net worth.

At a glance

Residential real estate is unlikely to offer investors a higher return than a well-diversified portfolio of stocks, bonds, and alternative investments. Real estate's status as an illiquid bulk holding limits investor flexibility, and high transaction costs make a long investment horizon necessary.

Is real estate a better investment than stocks? ›

While stocks are a well-known investment option, not everyone knows that buying real estate is also considered an investment. Under the right circ*mstances, real estate can be an alternative to stocks, offering lower risk, yielding better returns, and providing greater diversification.

Despite what some may think, 2023 is still a good year to invest in real estate, thanks to advantages like long-term appreciation, steady rental income, and the opportunity to hedge against inflation. Mortgage rates are expected to decline, but the housing market is likely to remain competitive due to low supply.

Real estate can be an asset class with high returns. It also usually offers a hedge against inflation. Since real estate has historically been inversely correlated with conventional assets, it can be a good way to diversify your investments away from the stock market.

It might not come as a surprise, but nearly 90 percent of ultra-high net worth individuals got, and maintain, their wealth by investing in real estate. Granted, some high-net-worth individuals are more invested in real estate than others.

The benefits of investing in real estate are numerous. With well-chosen assets, investors can enjoy predictable cash flow, excellent returns, tax advantages, and diversification—and it's possible to leverage real estate to build wealth.

It is commonly agreed that allocating between 25 and 40 percent of your net worth to real estate ( including your home) allows you to capitalize on the advantages of real estate ownership while giving you plenty of flexibility to pursue other avenues of investment and wealth development.

Real estate investing has played a role in helping to create 90% of the world's millionaires. Real estate investing has played a role in helping to create 90% of the world's millionaires. Real estate is one of the most effective wealth building vehicles and is an important component of a well-diversified portfolio.

Each real estate office sets its own standards for top producers, but it's safe to say that a top producer would have to sell at least one home per month to qualify. Top producers earn around $112,610 a year to start, according to the BLS. 1 Mega-stars could earn $500,000 per year and up.

Andrew Carnegie, one of the wealthiest entrepreneurs of all time, once said that 90% of all millionaires. become so through owning real estate.

What is the best long time investment? ›

According to the data, 69% to 84% of retail investors lose money.

Choose the right career

And one crucial detail to note: Millionaire status doesn't equal a sky-high salary. “Only 31% averaged $100,000 a year over the course of their career,” the study found, “and one-third never made six figures in any single working year of their career.”

Many people are unable to begin creating wealth due to fear. They're scared about money, or the negative things that come with owning rental properties—like evictions or repairs. I've done many episodes about fear, and I strongly believe that your ability to change your life lies in your ability to quiet your fears.

Even after buying the property, you have to pay property tax, society maintenance, pay for repairs, etc. Moreover, if you have rented your property, there are chances of damage to the property, which is an added cost to you. All these expenses do not make real estate a good investment option.

There are 5.3 million millionaires and 770 billionaires living in the United States. Millionaires make up about 2% of the U.S. adult population. While an ultra-high net worth will be out of reach for most, you can amass $1 million by managing money well and investing regularly.

Additionally, statistics show that the top 2% of the United States population has a net worth of about $2.4 million. On the other hand, the top 5% wealthiest Americans have a net worth of just over $1 million. Therefore, about 2% of the population possesses enough wealth to meet the current definition of being rich.

California

There are just under 72,500 tax filers in California with an adjusted gross income above $1 million.

Commercial real estate is known to yield higher returns than residential real estate. If you can afford to manage a commercial space, it can prove lucrative over time, depending on your area. The value of commercial real estate is determined in part by how much revenue it generates.

Most wealthy people invest in multifamily real estate to get the paper benefits of asset depreciation deductions in taxable income. Basically, what that means is that the IRS will consider an asset to be depreciating in value every year even though, in reality, the value may be appreciating.

What part of real estate makes the most money? ›

Real Estate Broker

A real estate broker is permitted under law to negotiate and organize real estate dealings. A career as a real estate broker is one of the highest paying and lucrative professions in the real estate industry. On average, experienced brokers take home a six-figure pay.

There's a Difference Between Buying Real Estate and Investing in Real Estate. Buffett isn't opposed to investing in real estate and has invested in several real estate investment trusts (REITs) over the years. However, he knows it doesn't make sense for him to get into the business of being a landlord.

Stock markets are historically more volatile than real estate, making them riskier investments. Recent stock market volatility has been due to the uncertainty caused by the coronavirus pandemic and rising interest rates over the past year.

Average Returns on Real Estate Investments

As you can see, there's a lot that goes into real estate investment returns. But if you want to know the average annualized returns of long-term real estate investments, it's 10.3%. That's about the same as what the stock market returns over the long run.

Economic factors, such as inflation, have a direct impact on the real estate market. As with other goods and services, real estate prices may rise alongside inflation. This is due to the fact that real estate is commonly considered a safe and stable investment that can be used to combat the effects of inflation.

The Market Ahead

Redfin deputy chief economist Taylor Marr expects about 16% fewer existing home sales in 2023 vs 2022. Marr believes potential buyers are still grappling with affordability, high mortgage rates, high home prices, inflation, and a potential recession. “People will only move if they need to,” Marr says.

2% Rule. The 2% rule is the same as the 1% rule – it just uses a different number. The 2% rule states that the monthly rent for an investment property should be equal to or no less than 2% of the purchase price. Here's an example of the 2% rule for a home with the purchase price of $150,000: $150,000 x 0.02 = $3,000.

Real estate offers a lower capital gains tax rate at the time of sale compared to the tax rate investors will pay at the time of withdrawal from a 401(K).

For example, those who invest in their 20s and 30s will begin earning cash flow sooner than their peers. Over time, as they pay down the debt on those properties, they can either a) maximize cash flow on debt-free properties; or b) refinance those properties with new, long-term debt.

What investment makes the most millionaires? ›

No matter how much their annual salary may be, most millionaires put their money where it will grow, usually in stocks, bonds, and other types of stable investments. Millionaires put their money into places where it will grow such as mutual funds, stocks and retirement accounts.

Ultra-wealthy individuals invest in such assets as private and commercial real estate, land, gold, and even artwork.

To save on closing costs

If you have the funds, paying all-cash for a home definitely saves you money, since you won't have to pay any of the costs associated with taking out a mortgage. The origination fee and other closing costs can add up to 2 to 5 percent of the purchase price.

The 70% rule can help flippers when they're scouring real estate listings for potential investment opportunities. Basically, the rule says real estate investors should pay no more than 70% of a property's after-repair value (ARV) minus the cost of the repairs necessary to renovate the home.

Real Estate Is a Hedge Against Inflation

“Real estate assets are typically the best inflation hedge available,” he said. “Real estate will grow in value with inflation, cash in the bank will not. …

Homeownership is the largest source of wealth among families, with the median value of a primary residence worth about ten times the median value of financial assets held by families.

If you retire at age 65 and expect to live to the average life expectancy of 79 years, your three million would need to last for about 14 years. However, if you retire at 55 and expect to live to the average life expectancy, your nest egg would need to last for about 24 years.

In 2022, the No. 1 action Americans took to build wealth, stated by 27% of respondents, was investing in the stock market. Just 12% invested in real estate.

Despite what some may think, 2023 is still a good year to invest in real estate, thanks to advantages like long-term appreciation, steady rental income, and the opportunity to hedge against inflation. Mortgage rates are expected to decline, but the housing market is likely to remain competitive due to low supply.

Is real estate or stocks more profitable? Investments in real estate have historically earned 3% to 4% per year on average; contrasted to investments in stock market indexes earning approximately 10% annually over the long-term.

Is real estate riskier than bonds? ›

Equities and real estate generally subject investors to more risks than do bonds and money markets. They also provide the chance for better returns, requiring investors to perform a cost-benefit analysis to determine where their money is best held.

High-quality bonds and fixed-indexed annuities are often considered the safest investments with the highest returns. However, there are many different types of bond funds and annuities, each with risks and rewards. For example, government bonds are generally more stable than corporate bonds based on past performance.

A stock represents a share of ownership in a company. Stocks offer the biggest potential return on your investment while exposing your money to the highest level of volatility.

Commercial real estate is known to yield higher returns than residential real estate. If you can afford to manage a commercial space, it can prove lucrative over time, depending on your area.