Thinking of diving into the world of real estate? If you do your due diligence in research, have the capital, and are well prepared, you can have a long and successful undertaking in this kind of investment. As with all things, you want to weigh the risks vs. the rewards. There are certainly many benefits to investing in real estate. Read on for a glimpse into what these are.
Value Appreciation
The general rule of thumb is that while the loan is being paid down, the value of your real estate purchase will go up. The only thing about this is that you have to be in it for the long haul, as you’ll surely need to ride out some recessions here and there. If you panic and sell right away, you’re not likely to see any significant returns. If you remain calm in all markets, however, you’ll surely see your property appreciate in value.
You Can Rely on Your Knowledge
If you’re confident in your ability to invest with success, the nice thing about real estate is you are your own boss. You can research your financial advisor’s ad nauseum, but there will always be that hint of doubt in the back of your mind that they are investing your hard-earned money in the right way. With real estate, you can count on your own ability to hustle. You can talk with other investors, do a ton of market research, and join investment groups which will likely give you a leg up on other potential investors. In other words, you do you, and if this is your M.O. anyway, this will be a great fit. And if you’re a DIY person who can handle remodels and repairs as well as decorating your property on your own, you’ll be even more well off.
This is the very reason Frontier Properties CEO Nick Evans got into real estate. He knew he had a knack for flipping houses and investing money, so he was able to parlay his passion into an extremely well-run and successful business.
Inflation Will Help You
Just the word “inflation” makes the average person cringe. With real estate investors, however, this is often a welcome trend. Along with everything else, inflation will push up rent prices while fixed-rate mortgage payments will remain the same. It’s simple math at that point, and you’ll reap the benefits. And as long as you or whoever you’ve hired to handle the property treats tenants well and handles home maintenance, these people are likely to stick with you despite an increase in rent.
You’ll Get Tax Breaks
As everyone knows, owning real estate means tax breaks, but what you might not realize is how significant your tax breaks will be if you rent out your property. As Entrepreneur.com VIP Contributor Brandon Turner notes, “Not only is the cash flow received from your rentals not subject to self-employment tax, the government offers tax benefits including depreciation and significantly lower tax-rates for long-term profits.” Talk about a win/win.
These Investments Enhance Your Portfolio
You’ve likely heard of the need to diversify your portfolio, and real estate investment will do just that. As Investopedia Contributor Ian Woychuk, CFA, notes, “Real estate returns have relatively low correlations with other asset classes (traditional investment vehicles such as stocks and bonds), which adds to the diversification of your portfolio.” It also yields higher returns for you than other investments in relation to risk.
The Cold, Hard Cash
Whether this is a side gig or has the potential to be your full-time pursuit, a huge benefit to real estate investing is that it’ll give you some liquid to work with. The extra cash you have after the bills are paid every month can be reinvested in real estate or other investments, saved, or used to support your current lifestyle. Either way, it’ll be nice to have some cash flow.
If you’re thinking about investing in real estate, you’ll want to weigh any risks versus the benefits listed here. If you decided that the rewards are greater than any negatives of investing, you’ll be on your way to an exciting pursuit.