Real estate has always been seen as a viable means of investment that will enable a person build trans-generational wealth. Whether you are talking about towering skyscrapers that house global corporations or charming estates and condominiums in the suburbs or city centers, properties have intrinsic value and great potential for lasting return on investment.
Some people still do not believe what they term the ‘hype’ about real estate investment. That is why we will explore what it means to invest in real estate and the benefits to be expected. Although there are many benefits, this article we will focus on 5 reasons to consider investing in this industry.
5 Reasons to Consider Real Estate Investment
There are many investment schemes that can be worth your while and considered smart financial moves. However, below are 5 compelling reasons why you should invest in real estate: –
1. Reliable Cash Flow
One of the most compelling reasons for considering this investment is the possibility of generating passive income consistently. Rental properties provide supplementary income that can even grow to the point that you wouldn’t need a salary anymore.
Unlike bonds and stocks that may yield interest and dividends annually, real estate provides cash flow on a monthly basis which is a more regular income. Additionally, if the properties are properly managed and constantly occupied, the income generated can take care of property taxes and mortgage payment and still have extra which will be your profit.
Here’s a tip; look out for properties in places where rentals are in high demand such as university towns, places near public transportation and business centers as they have more potential for regular occupancy and thereby more income.
2. Long-Term Appreciation
Everyone knows that real estate appreciates over time. Although markets fluctuate, time has shown that the value of properties rise eventually, most especially in cities that are still growing and regions that are experiencing population growth, investment in infrastructure and economic development.
Unlike electronics, cars or other things that depreciate over time, a well-maintained piece of real estate becomes more valuable especially as the surrounding regions develop. What this means for your investment is that it not only provides income for you in the meantime but also keeps growing in value with time. This increases your overall net worth over the years.
Many investors also capitalize on this increasing value to sell off the property at a profit or refinance it so that they can use the equity for other investments; this creates a snowball effect of wealth creation.
3. Tangible Asset with Control
Unlike mutual funds or stocks, real estate is a physical and tangible asset and it is not susceptible to market volatility. It is well within your direct control to manage risks and improve its value. Additionally, you can increase the worth of the property by home improvements/renovations and also efficient management. Click here for information on market volatility.
Furthermore, you can decide who to rent your property to and how much to charge them. You can also decide if and when to sell. This control is a compelling reason which provides a strong edge for the protection of one’s investment.
4. Tax Advantages and Incentives
One of the reasons that is unfortunately not well-known for real estate investment is tax incentives and advantages. There are many tax exemptions and deductions that property owners can take advantage of and they include the following: –
- Property taxes
- Mortgage interest
- Repairs and maintenance
- Depreciation of property over time
- Operating expenses
In the US there is the 1031 exchanges that allows capital gains on real estate to be reduced through re-investing in similar properties or long-term holding strategies. All these help investors to increase their net income and reduce their total tax burden.
5. Portfolio Diversification and Inflation Hedge
Experienced investors know that it is important to diversify one’s portfolio to reduce overall risk. Real estate does not behave like stocks and bonds which means that it does not always follow the same trend of the general financial markets.
When you add properties to your list of investments, you protect your investment by reducing the overall volatility. This therefore means that the properties serve as a natural hedge against inflation. As market prices rise, your rent will rise and the value of your property too. This means that your investment will remain at par with living costs or even outperform it.
Bonus Point: Multiple Investment Strategies
Another reason why you should consider real estate investment is because there are different strategies for investment depending on your tolerance for risk and your financial goals.
Find below some examples: –
- Buy and Hold – This means acquiring a rental property so that it can generate long-term income and appreciate in value.
- Fix and Flip – This entails buying a fixer-upper, renovating it and selling at a profit.
- Short- Term Rentals – This includes leveraging platforms like Airbnb if you live in a region that attracts heavy tourist traffic.
- Commercial Real Estate – This involves investing in warehouses, retail spaces or office buildings.
- REITs (Real Estate Investment Trusts)– This is for those who do not want to directly manage properties. You can visit this site: https://www.investor.gov/ for more information.
Conclusion
Real estate will continue to be one of the most rewarding and accessible means of wealth creation. The combination of tax benefits, control, appreciation, consistent cash flow and the potential for diversification makes it a viable option for both experienced and new investors.
We have shared some basic but important information here. You can also research further into any niche of the real estate industry that has caught your fancy. Never put down a dime until you fully understand all that the investment strategy entails.
