Real estate is an excellent investment – and for good reasons. With the correct ventures, some savvy decisions, and a good property manager, you can enjoy benefits such as predictable cash flow, tax advantages, and financial diversification. And the best thing is anyone can invest, so long as they have the proper preparation, research, and funds.
Real estate is an excellent investment choice whether you want to grow your portfolio or enjoy passive income. If you’re not convinced, here are ten reasons you should invest in real estate.
1. Real estate is a tangible asset with high value
A tangible asset is a physical item with monetary value, which can be anything from land and property to technological equipment. These items are generally always worth a corresponding amount of money – instead of a stock market investment, which could quickly become worth $0 if the market crashes.
2. Real estate values appreciate
The value of a piece of real estate tends to appreciate – or increase – over time, particularly in highly urban areas. Often, the land itself will hold more value than any structure on it or could even have value without any structure on it.
3. It’s a steady income
Investments like the stock market do not allow you to predict how much income you’ll receive from that stake. When it comes to real estate, though, you can readily estimate that income based on things like tenant dues. So long as your property has occupants, that’s a steady – and passive – income every month.
(Of course, ensure you have a good property manager to maintain the upkeep of your property, or you won’t have any tenants – and therefore no rent!)
4. It provides long-term financial security
So long as you’ve paid your dues, the property and building will belong to you long-term – and so you can continue to collect rent and dues on it. It also means you can wait for a property’s value to rise (also known as waiting for a property to appreciate). Then you can sell it for more than what you bought it for, and make a tidy profit!
5. It gives you tax advantages
A real estate investment comes with tax benefits. If you own your house, for example, you can deduct mortgage interest from your taxes, as well as state and/or local property taxes. Then there’s operating and maintenance costs, plus insurance.
6. You diversify your investments
Maybe you’ve already invested in the stock market, but as the saying goes – don’t put all your eggs in one basket! By diversifying your portfolio, you’re giving yourself more financial security if one investment fails. You’re also giving yourself a boost if multiple investments profit.
7. Real estate lets you leverage funds
Yahoo! Finance explains this concept well – “As you pay your mortgage balance down and/or renovate the property to increase its value, you can leverage the equity to further your investments. The equity in your property is the difference between your home’s value and the amount you owe on your mortgage. Any difference is your profit.”
If you invest in a house, your equity increases the longer you own it. As you pay off the loan on that house, you build more equity. Then you can leverage that equity through a home equity loan, which can let you do things like pay for your kids’ college tuition or renovate your home.
8. You can maximise your returns
Real estate, after all, offers better returns than the stock market since it appreciates at a higher percentage per year. Just be careful where you’re investing in property, and if you make the right choices, you’ll get good returns on your investment.
9. It benefits the community
By investing in property and constructing buildings, you’re also giving back to your community. A commercial centre, for example, would give businesses a place to rent and boost the local economy. Meanwhile, renting out rooms in a building could provide affordable housing.
10. You can save for your investments
You can save that extra money for other investments between tax breaks and passive income, such as a retirement fund or a vacation home. You can also use that income to pay off your mortgage. And after you retire, if you keep the property, you’ll have income beyond your pension, too. All in all, a real estate investment can bring you plenty of security – and peace of mind.