Reason 1/10: Tangible Asset with Intrinsic Value

Joshua Waldron • January 19, 2025

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Why Real Estate Investing is a Smart Choice for Building Wealth

Introduction

Real estate investing has long been heralded as one of the most reliable paths to financial freedom. From providing steady cash flow to creating long-term wealth, real estate offers a unique combination of stability and opportunity that few other investments can match. Although there may be a lot more than 10 good reasons to invest in real estate, we have narrowed it down to what we think are the most important. Over the next few weeks, we will release a series of 10 blog posts explaining the importance of adding real estate to your wealth portfolio. Read below for reason one. 


Overview

Investments come in many forms, from intangible financial instruments like stocks and bonds to tangible assets like real estate or commodities. Among these, tangible assets with intrinsic value hold a unique and often superior position in the investment world. Here’s why they stand out as a reliable and effective choice:


Built-in value that does not disappear

Tangible assets, such as real estate, gold, or art, have inherent value simply because of their physical existence. Unlike stocks or cryptocurrencies, whose value depends on market perception or a company’s performance, tangible assets are rooted in their utility or scarcity.

For example, real estate provides housing or commercial space, fulfilling essential human needs. This intrinsic value creates a safety net for investors, ensuring that these assets retain worth even during economic downturns. Products, services, companies and even entire industries can be disrupted to the point of obsolescence, but basic human needs, such as shelter, are not as easily changed


Protection against market volatility. 

Tangible assets are often less volatile than financial markets. Stocks and bonds are subject to sudden shifts based on economic conditions, interest rates, or even investor sentiment. In contrast, the value of tangible assets like real estate typically moves more steadily. For instance, a property’s value may appreciate over decades, providing a consistent growth trajectory that’s less susceptible to sudden crashes. Even when there are market crashes, real estate has historically rebounded and surpassed the value before the crash. 


Hedge your other positions

One of the most significant advantages of tangible assets is their ability to act as a hedge against inflation and other market conditions. As the cost of living rises, so does the value of real assets like real estate and commodities. Rental income and property values, for instance, often increase in tandem with inflation, helping investors preserve and grow their purchasing power.

Intangible investments, such as bonds or cash savings, tend to lose value over time due to inflation eroding their purchasing power. Tangible assets, on the other hand, maintain and often increase their real value.

Additionally, tangible assets provide an excellent way to diversify an investment portfolio. They often move independently of traditional financial markets, reducing overall portfolio risk. For instance, while stock markets may dip during an economic recession, the demand for housing often remains stable or even increases, making real estate a valuable counterbalance.

During economic uncertainty or geopolitical instability, tangible assets shine. People tend to seek safety in investments like real estate when financial markets are unpredictable. These assets act as a “safe harbor,” retaining value even when other investments falter.


Forced appreciation and direct control

Tangible investments like real estate allow investors to exercise a level of control rarely possible with intangible assets. A property owner, for example, can renovate, improve, or manage a property to enhance its value and income potential. This active role enables investors to directly influence their returns, which isn’t possible when investing in stocks or mutual funds managed by third parties. 

Opportunities to leverage

Tangible assets, particularly real estate, offer investors the ability to leverage their investment. With a relatively small initial outlay (a down payment), investors can purchase an asset of significantly higher value using borrowed funds. Over time, as the asset appreciates, the returns on the initial investment can multiply, providing superior long-term gains.

It is common for real estate investors to buy properties under value, force appreciation through renovation, and then leverage the asset by doing a “cash out refinance.”. Often, the amount the banks will lend on the property is more than the initial investment, creating an opportunity to make a return on bank money, without risking your own. 


Generational Wealth

Because tangible assets generally appreciate over time and can provide consistent income, they are ideal for building generational wealth. Real estate, in particular, is often passed down through families, providing a lasting legacy of financial security. According to a 2024 Benzinga article by Kevin Vandenboss titled, “The world’s wealthiest individuals are Focused On Real Estate,” 90% of the world's millionaires are invested in real estate, and on average, 27% of their portfolios are in real estate.


Conclusion 

Tangible assets with intrinsic value provide a combination of stability, growth potential, and control that intangible investments often lack. They are rooted in the real world, serving essential functions or representing scarcity, making them less vulnerable to market fluctuations and economic crises. Whether you’re seeking a hedge against inflation, steady income, or a way to diversify your portfolio, tangible assets like real estate stand out as a superior choice.

If you’re ready to explore the benefits of investing in tangible assets, REIF, LLC can guide you in finding real estate deals tailored to your goals. Contact us today to start building a more secure financial future.

Sources

https://finance.yahoo.com/news/worlds-wealthiest-individuals-focused-real-141602783.html

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