There is an entire world of real estate investments out there just waiting for you to seize the opportunity. You’ll find that real estate is a guaranteed cash flow under the right circumstances, with minimal risk compared to other investment opportunities. Find out more about the main reasons to find your way into real estate and property investment, and find out if it’s the best choice for you and your lifestyle.
1. Gradual Income – On average, real estate can yield a 6% or higher cash flow. Real estate properties can generate rental income, which can cover mortgage, insurance, property taxes and operating costs. Additionally, they generate a consistent monthly or annual income that comprises gradual cash flow.
2. Value Appreciation – Buying property based on potential demand for the properties location or the property itself can increase in value over time. Generally, real estate values can appreciate over time and along with it so can rent, which increases your cash flow.
3. Ability to Leverage Your Property - Use your own property mortgage to reduce the amount of capital required to purchase a property. By using borrowed funds to purchase a property, the after-tax profit can exceed the cost of borrowing. In times of real estate value increases, this can provide high gains for investors.
4. Build Equity – You can build equity and contribute to your net worth during your period of ownership. As you pay your property mortgage down over time, you are able to increase your cash flow and be able to invest in other properties.
5. Improve your Property - You can increase the value of your own property. As property investments constitute a tangible, physical property, they can be structurally and aesthetically improved to create a demand for higher rental fees. Through various improvements and additions to your property, you can increase your own asset’s value.
6. Diversify your Portfolio – Diversification is easy with real estate investments in a couple of ways. You can reduce your overall risk when looking to purchase multiple types of properties or different housing markets. You can also add in real estate to an existing portfolio which lowers your overall risk by decreasing your portfolio’s volatility.
7. Benefit from Inflation – Not only does rent increase with demand of a property, but as inflation occurs, much of the financial pressure is on tenants rather than you as the owner. Also, as economies expand so does your property value.
8. Deferrable Taxes – Quick sells in stocks trigger steep capital gains taxes. With real estate, you can take advantage of some aspects in tax codes to defer taxes related to selling property by using any gains to purchase another property.
9. Tax Breaks and Benefits – In some cases, property related expenses are tax deductible such as upkeep, maintenance, improvements, and even mortgage-related interest. These deductions can help reduce overall taxes and offset some of these expenses.
10. Real Estate Investment Trusts (REITs) – If you’re not ready for property management, REITs can be bought and sold on many major stock exchanges. They can be bought and sold under high volume, so you can get in and out quickly if needed.