6 Reasons Why Real Estate Is a Good Investment
These days when someone wishes to build equity and wealth there are several options to choose from. From stocks and bonds to real estate there can be a lot of decisions to make on what makes most sense to invest your money in. However, many people build wealth using a basic asset they own like owning an additional property. Let’s examine why real estate can be a great investment and how it can help you build your wealth.
Cash flow
When you invest in real estate you can generate steady cash flow when you are collecting money by renting the property out. To calculate this, add up your gross rents and then deduct your expenses including things like mortgage payments, taxes, insurance and maintenance costs.
Great returns
A long term real estate investment can have some fulfilling returns. Appreciation over time has historically earned many people some substantial equity. Always choose the right location of course so that your property will always be in high demand. This should help lessen any losses.
Long term security
The long term security of real estate can make it a great investment as time goes on. Also, you are not just waiting for your real estate investment to appreciate in value. Instead, you are renting out the property today and collecting money every month that you have paying tenants. It is a win-win!
Tax advantages
One of the best advantages to owning real estate are the tax benefits. Per the IRS guidelines there are expenses you can deduct from your taxes that include things like mortgage interest, property taxes, operating expenses, repairs and depreciation.
Leverage funds
Many investors will buy their first investment property by taking out a Home Equity Line of Credit (HELOC) on their primary residence. Lenders typically allow homeowners to borrow up to 80 percent of their dwelling’s value so they are using their equity gained rather than using other available financial resources. It’s a prime example of having your money work for you.
Inflation protection
Investing in real estate can also provide some great protection against inflation. Inflation raises the price of goods, but it also raises wages. Since wage growth is tied to rental prices, you can increase the rent on your rental properties once the current leases come to expire/renew every year.
Best of all with real estate investing, you are your own boss and control everything. While it may come along with management responsibilities and the like, you are in control of your own destiny.
