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Why Is Real Estate Business Considered To Be Most Profitable In 2018?

Why Is Real Estate Business Considered To Be Most Profitable In 2018?


Planning to join the real estate business? The first thing you ought to know is that real estate agents help to facilitate the purchase or sale of a home or commercial property on behalf of their clients. If you are buying a home or leasing a commercial property, real estate agents can help to review the property value and compare them to similar sales prices in the area. Completing a deal is not that easy either. There are times real estate agents are required to navigate through lengthy negotiations. This is done to satisfy the parties involved and ensure the smooth transfer of the property.

Did you know that the average salary of a real estate agent in the US is $48,883? Apart from the salary, real estate agents are entitled to bonuses, profits and commission. Here is an estimate of what a real estate agent earns:

l Salary : $24,000 – $103,456

l Bonus : $0.00 – $15,490

l Profit Sharing : $1,021 – $78,297

l Commission : $397 – $151,672

l Total pay : $24,515 – $115,446

Source: PayScale

As you can see, the total pay is quite good plus the career is exciting as you get to connect with clients and improve your performance.

So, is it worth it?

Let’s find out!

Here are reasons why real estate business is profitable in 2018.

Expected rise in home value

Did you know that home prices in the US are expected to increase by 2% in 2018?

Well, according to the National Association of Realtors, majority of states in the US are expected to experience higher gains than others such as Washington –Seattle (5.5% increase), Arizona (5.6% increase) and Colorado (5.9% increase).

According to a joint report carried out by researchers from Deutsche Bundesbank, University of California and University of Bonn, real estate has the capability of delivering 7.05% in annual returns. This is in comparison to other financial instruments like stocks (6.89% annual returns) and bonds (2.5%). The research data above was gathered from studies spanning over 150 years – from 1870 to 2015.

What does this tell you?

Real estate business remains a great investment that offers above average returns and stability not only in the past years but in 2018 and in the future too.

Acts as a safe investment

It is a common practice among investors to invest in gold, US Treasury Bills and Swiss francs among other assets if experts predict that the market is going to take a hit. Gold, US Treasury Bills and Swiss francs have always been preferred as safe haven investments because they maintain their value in case of a financial crisis just like the financial turmoil of 2008.

According to economic experts, real estate investments are said to be weatherproof and durable as an asset class.

Another reason why real estate is a safe investment is because it is more stable than stocks and even cryptocurrencies. This is despite real estate being the main culprit behind the last major financial and banking crises such as Spain (1970s), Norway(1980s), Japan, Finland and Sweden (1990s).

Higher diversification potential

One of the preferred methods of financing real estate investment is mortgage. To get started, all one needs is to put a 20% down payment and finance the rest using a low interest mortgage. Using this option, investors can invest in multiple real estate properties because all they have to do is put a 20% down payment. The payments for the low interest mortgage will be paid off from the proceeds gained from rental income.

That is not all.

Experts have revealed that real estate has a low, negative correlation to other assets. If you add real estate to your portfolio, it has the potential of lowering volatility. As a result, the investor will experience higher returns.

Tax deductions benefits

Tax deduction is a major benefit enjoyed by real estate investors. Want to know what deductions investors can claim. Well, they include property taxes, interest on mortgage, business related travel costs, repairs and maintenance.

Apart from that, real estate investors can take advantage of the 1031 exchange. It – 1031 exchange – provides an exception which allows investors to postpone on paying taxes for gains accrued from the sale of real estate. For this to happen, the investor must invest the proceeds from the sale in a similar property.

Provides stable income return

One of the most desirable characteristic of real estate is the total annual returns accrued from rental income spanning over a long duration. From 1977 to 2007, 80% of US real estate returns were accrued from income flows. Thanks to this, it helped to lower volatility. Why? Asset classes that return more in terms of income are less volatile than assets relying on capital value return.

That is not all.

When compared to traditional income sources, real estate is much more attractive. This is because real estate does trade at a yield premium against US Treasuries.

Final Thoughts

From the reasons above, you can see that real estate is and will remain an attractive investment option for investors in 2018 and beyond. In case they are interested in a particular property listing, you are the guy or gal to call. As a result, not only will you be assured of a salary, bonuses, profits and commissions as a real estate agent but job security too.


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