The following are the top advantages
of investing in real estate.
1. You Can Build Equity for the
Future
One of the advantages of investing
in real estate is being able to build equity. Equity is an asset that is part
of your net worth. As you pay off your mortgage, you build equity. As you build
equity, you now have leverage to acquire additional rental properties and increase
your capital.
2.
You Can Generate Passive Income
By investing in real estate, you can
generate passive income that is nearly tax-free. Your rental properties will
work for you even when you are sleeping. By buying several rental properties
that generate enough income to cover your expenses, you have the freedom to do
what you enjoy, instead of spending all of your time at work.
3. It Can Provide Cash Flow for
Retirement
Real estate investing, when done
right, is a stable way to increase wealth over a period of time. Among the many
benefits of real estate investing is that it can provide cash flow for
retirement. This means it can help supplement your retirement years with income
from your rental properties.
4. Investing in Real Estate Benefits
the Community
While most investors focus on the
ROI, the CAP rate, the cash flow, and other financial indicators, a huge and quantified
benefit of real estate investing is the impact on the community. Responsible
real estate investors improve the communities by improving available housing,
maintaining properties, and increasing the local tax revenues. This directly
impacts the communities and improves the lives of people living there. By
buying and repairing a dilapidated home, one not only removes an eyesore but
also improves the self-esteem of the residents living around the home. In a
world where investors are associated with unchecked greed, the mom-and-pop real
estate investors are a bright spot who change things for the better.
5. You Can Indulge Your Entrepreneurial
Spirit
There are many ways to invest in
real estate and become an entrepreneur. You can buy a home, fix it up and put
it back on the market for a profit. Buy a property to hold and let the
appreciation create wealth. Perhaps you become a landlord and start purchasing
rental homes, multi-family homes, or even apartments. Maybe land development is
for you. You are the boss.
6. You Can Enjoy the Portfolio
Diversification Benefits of Owning a Physical Asset
Investing in real estate offers
inflation protection as well as the portfolio diversification benefits of
owning a physical asset. Real estate is a tangible asset that can always be
monetized through renting or residing in the property, regardless of financial
market conditions. This makes it far more resilient against asset market swings
compared to traditional stocks or bonds. Real estate is part of the broader
category of alternative investments, which include everything from art to
collectibles and physical gold. The tangibility of real estate also affords
property owners with a sense of stability during bear markets or short-term
stock sell-offs.
7. Real Estate Investing Is a Hedge against
Inflation
While most people fear inflation,
this is not the case with real estate investors. Investing in properties is an
excellent hedge against inflation. As the price level goes up, so does the
rental income you get from your property and your investment’s value. This
means that real estate investors are protected against both the immediate and
the long-term effects of inflation. Although this might not be the first
benefit of real estate investing that comes to mind, you should take it into
consideration because for real estate investors, an increase in the cost of
living is associated with a growth in their cash flow.
8. You Can Enjoy Tax Benefits through
Depreciation
There are different reasons to
invest in real estate. It is a proven way to build wealth over time and can help
generate cash when leased. It can also provide you with tax benefits through
depreciation, and this can help increase your returns.
9. It Can Be an Alternative Means of
Saving for a College Education
Real estate investing can be an
alternative vehicle for college savings. It is recommended that young families
invest in the purchase of one property for each child they believe will attend
college. The property can be financed with a 15-year mortgage, thus being paid
off prior the child’s 18th birthday. It allows families to actively save
through the renters’ payments. When the property is paid off, they can either
sell or continue to use it as a source of cash flow.
Everyone should own at least one
house or a piece of property. One of the many benefits of investing in real
estate is being able to generate wealth through appreciation, building equity,
and hedging against inflation. It can also provide cash flow with passive
income from rental properties. These are the reasons why real estate should be
a key component of your investment portfolio.
11. Real Estate Can Be a Stable
Investment with Ongoing Income
Unlike stock market investments,
real estate investment does not wildly fluctuate on a daily basis. It is a
stable investment that provides you with an income. You simply collect your
ongoing income (known as Cash on Cash Return) on a periodic basis and hope to
sell when the price appreciates substantially and the market is high. Of
course, the market isn’t the same in every city, so opportunities to buy and
sell can vary substantially across the country. Many people compare real estate
investing to bond investing, because real estate provides stable cash flow for
the owner. However, bonds are more sensitive to market fluctuations. Real
estate properties won’t immediately change in price based on capital
contributions or because of political volatility. This makes real estate a safe
and stable investment. In many cases, real estate investments offer attractive
tax benefits to the owners too.
12. Real Estate Is Easy to Finance
& Provides Leverage
Real estate as an asset investment
vehicle is easy to finance. You can borrow 50 percent to 90 percent of the
acquisition cost at attractive rates, often rates below the anticipated annual
investment return. The ability to magnify the investment return with financing
is called positive leverage. Stocks, bonds, commodities, and art do not offer
the same ease when being used as collateral for financing.
13. The Value of Real Estate
Appreciates Well Over Time
Industrial real estate has been a
very attractive investment for many individuals and institutional investors.
Recently, the amount of capital chasing the ownership of industrial real estate
has substantially increased. Values are increasing for two reasons. The first
is that rental rates are continuing to rise because of the demand for these
facilities and increasing construction costs. Secondly, with the number of
investors bidding on industrial real estate investments, the cap rate, or
yield, are continuing to compress, which is increasing values?
14. It Can Outpace the Returns of
Classic Investing
Real estate can outpace classic
investing because you don’t have to put in the whole amount of investment. The
bank puts up 80 percent of the cash for the investment, but you keep 100
percent of the profits. If both appreciated at the same rate, your return on
the real estate investment would be significantly higher due to the fact that
you only put up 20 percent of the case for the investment.
15. You Can Help Provide a Home for
Others
One overlooked benefit of real
estate investing, specifically residential real estate, is the pride in helping
provide a home for others. Everyone needs a roof over their head, but not
everyone has the upfront resources to purchase a home, making renting the only
other option for them. We often hear about landlords shirking their
responsibilities and making living conditions downright nightmarish for some
tenants. By investing in a residential real estate, not only are you helping
house a family, but you’re ensuring that family is housed in safe, healthy, clean,
and fair conditions.
16. You Can Help the Local Economy
One of the advantages of real estate
investing is having the opportunity to help the local economy. As a real estate
investor, you will have the opportunity to employ local licensed contractors,
purchase building materials, and generally stimulate the local economy near the
construction site.
17. You Have the Option to Change
Your Primary Residence as Needed
If you own multiple properties, you
may have the option to change your primary residence from one to the other,
should you decide to do that later in life. Many people prefer a two-story
house when they are raising a family, but decide to downsize to a one-story in
their golden years because it is more manageable for them.
18. Investing in Real Estate Helps
Mitigate Risk
One of the greatest benefits of having
real estate in one’s investment portfolio is for mitigating risk. Sure, having
a calculated income month over month is an outstanding benefit, but having
insulation against higher-risk investments like stocks is often important.
Having the right blend of real estate in one’s portfolio can offer just enough
diversification to help offset exposure by not hyper-focusing on one single
investment profile.
According to Bankable Insight,
investing in real estate offers a wide variety of opportunities for investors.
You have the option to invest in single family residences, multi-family homes,
vacant land, and commercial buildings, depending on your initial startup
capital, leverage, and personal preference. Even if you don’t have sufficient
experience in real estate investing, you can still get started once you have the
funds or resources to purchase a property.
20. Real Estate Can
Never Be Worth Nothing
Aside from the fact that most real
estate values usually appreciate, your real estate investment can never go down
to zero, even during a difficult time. Morris Invest believes that you can
always sell your property when you own one. Unlike a stock, real estate never
becomes worth nothing, even if the value drops.
21. There’s a
Potential for a High Rate of Return
One of the biggest benefits of
investing in real estate is the potential for earning a high rate of return.
According to Zito Realty Group, it’s possible to earn rental returns of 25
percent to 50 percent, depending on the location of your income-producing
property. This is much better compared to bank accounts, bonds, and even
dividend-paying stocks.
22. You’ll Benefit
from Longer Leases if You Invest in Commercial Real Estate
If you invest in a commercial real
estate, you’ll benefit from longer leases, which can provide you with more
stability and dependability. This is because most businesses would prefer to
stay in a fixed location for a longer period. Also, according to City Vest,
commercial real estate investors have the option to choose from the different
types of lease coverage they want to impose on their tenants.
23. Real Estate Investing Offers
Flexibility
Investing in real estate gives you
flexibility. You can invest in real estate, build up your portfolio over time,
and use your rental income or fix-and-flip profits as your main source of
income. You can manage your properties and projects around your schedule and
work for yourself. This offers you the flexibility of setting your own
schedule. Investing in real estate doesn’t have a salary cap, so your earning
potential can be limitless
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.