For many people, owning a home is a lifetime goal. In addition to having a place to live, purchasing property can generate a lot of money.
If you have considered investing in real estate, now is a great time to do so. Not only can it help you grow your net worth, but it can also be personally rewarding. If you are still on the fence, these benefits might change your mind.
1. Generate Wealth & Build Equity
One of the many advantages of real estate investing is generating equity. When you purchase a home or plot of land, it naturally increases in value over time. Your equity will build by paying down the mortgage and allowing the house to appreciate. This asset is part of your net worth, making real estate one of the most direct ways to generate wealth.
Equity can be paid out when you decide to sell the property or be used as leverage for a loan to increase your investment portfolio.
2. Reliable Long-term Investment
Real estate investment has been proven over time to be a stable way of making money despite constant market fluctuations. Unlike the stock market, which can be erratic, real estate rarely experiences market swings.
Properties don’t immediately change in price based on capital contributions or political power, making it a safe and stable long-term investment.
3. Inflation Protection
While most investments are prone to suffer from inflation, real estate investors can ease their worries because this market is rarely affected by it. In fact, property values generally rise when inflation rises as well.
This is beneficial to those who rent their houses out. Each year, you can raise the rent, thus earning more income. You can use that to pay off the mortgage or reinvest in other properties.
4. Provide Passive Income
Passive income is a stream of revenue a person earns in addition to their career. One of the most innovative ways to generate wealth is to create a way to earn passive income through rental properties. Although being a landlord does require routine maintenance, it allows you to grow equity and your net worth without much labor.
Managing your property yourself will earn you the most money back. Still, many property management companies will take over the day-to-day work. It’s up to you to decide how much you can make as a landlord.
5. Benefits the Community
In addition to the financial benefits of owning property, you can give back to your community. Investing in a broken-down house and taking on the responsibility of renovating it can make the neighborhood more appealing and drive up home prices. Your neighbors will love you for destroying the eyesore on the corner lot.
You’ll also help the local community by working with lenders, contractors, and designers and providing a home for a family.
6. Helps You Stay Active
If you plan to be a hands-on landlord, you’ll have to know how to make some repairs. If you have bought a fixer-upper, you’ll spend a lot of time doing physical labor.
Not only will this help you stay active, but you might also learn some new skills by watching construction tutorials or working with contractors to rebuild the home.
7. Wide Variety of Investment Options
There’s a wide variety of options when it comes to investing in real estate. Most people immediately assume it only involves buying houses or condos. However, there is much more to consider when considering investment opportunities.
Depending on how active you plan to be, your financial status, and your financial goals, you can spend your money on various properties. These include single-family homes, commercial properties, apartment complexes, distressed buildings, duplexes, and land. Each comes with unique challenges but can be equally rewarding to your portfolio.
8. Long-Term Investment Goals
Long-term goals like saving for kids’ college funds or retirement work well with real estate investing. For example, if you bought a rental property within 15 years of paying the mortgage and saving the money in a high-yield account, you would have a large sum of cash. The property could be paid off before your kids are even ready for college.
The same can be said about your retirement fund. Keep that money in a separate account and let it grow until you’re ready to ride off into the sunset.
9. Easy to Finance
First-time buyers might be surprised to find out that real estate is relatively easy to finance. New buyers can put down an average payment of 6%, while investment properties usually require a down payment of 15% to 25% of the purchase price.
That means buyers can borrow a huge chunk of their investments, with their return on investments outdoing the low interest rates they take on.
10. Ability to Create Leverage
Positive leverage is the ability to use financing to increase a property’s return on investment (ROI). For example, if you wanted to invest a large amount of money in the stock market, you would have to commit the total amount.
In real estate, you could invest a fraction of that chunk of cash and earn a higher return on investment. You can then keep that extra money for repairs or spread it out among other assets.
11. Tax Benefits
Savvy real estate investors can use rental property depreciation expenses to lower their taxable income and sometimes even eliminate it. Some of the many tax deductions include interest payments, insurance payments, utilities, repairs, HOA fees, advertising, and marketing.
These are some of the basic deductions, but having an experienced accountant can help you navigate other deductions for which you might be eligible.
12. Freedom and Flexibility
One of the many appeals of real estate investing is that literally, anyone with the capital can do it. You don’t need any degree or certificate to become successful in it. When you become successful, you can move around the country, invest in different markets, and grow wealth while pursuing other interests.
You might decide to invest in other markets or start a business you have always wanted. Whatever it is, you have the passive income to help achieve those dreams.
13. You’ll Always Have a Place to Retire
One of your investment properties could eventually become your retirement home. Sure, your big home might be lovely now, but you might want to settle down in a smaller condo on the beach somewhere.
You could buy that condo, pay off the mortgage, and in 20 years, you have a paid-off property ready to enjoy during your golden years.
Adam Spraker
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