Real estate is one of the best investments you can make, but why? The real estate landscape has changed which has left plenty of new opportunities open for investments. Despite the changes, there’s a stable and thriving industry.
Have you been thinking about how you can benefit from real estate? This guide explains six advantages of investing in real estate.
1. Stable and Predictable Cash Flow
One of the significant benefits of investing in real estate is it’s a way of expanding your income. Real estate brings rental income which increases your income. Even if you’re paying a mortgage you can keep some money in your pocket after all the expenses.
Real estate income is also far more predictable than other sources. If you’re a landlord, you can expect monthly cash flow once you’ve found tenants. This is a great way to diversify your income and find financial peace.
Buying or investing in real estate can also become your source of passive income. This means that your income is as good as automated. You invest, receive an ownership stake in a property then wait for regular income.
Passive real estate income is investing in a stock or real estate investment trust. It can also include real estate crowdfunding or DVC resales. All these forms of real estate investment allow you to earn without much involvement.
2. Covers Personal Expenses
How to start investing in real estate is often straightforward. You can access financing or mortgage for your first property. The property acts as your security and if you rent it out you can create an income stream.
Tenants are a massive advantage of investing in real estate. Rental income can cover your expenses including your mortgage payments. There’s one less monthly bill if your rental income is enough to cover mortgage payments.
Another plus is more leniency with taxes. Your cash flow is not subject to some tax deductions and you also enjoy lower tax rates. You make higher profits from your investment taking this route.
3. High Potential of Increasing in Value
One of the unique advantages of investing in real estate is property appreciation. Most of the time property increases in value. If you invest in property, its actual value 10 years from now can be many times higher than the buying value.
There may be a few factors that can affect the valuation of property over time. Property value might stagnate or go down but real estate is a long-term investment. In the long run, the potential of increased value of capital assets makes real estate worth all the wait.
Lenders are also aware of real estate’s high potential. It’s one of the few businesses banks allow high leveraging. This is where you use a small part of your money and borrow the rest to finance your property. Some lenders may let you borrow up to twenty times the amount of your savings.
Let’s say you invest $20,000 and borrow up to $180,000 from a bank to finance a $200,000 property. In 10 years, at an interest of 5%, your property appreciates to $325,778. Your small investment appreciates and your net worth blooms to the new value of the property.
4. Cushion Against Inflation
Inflation is one reason economic experts recommend investments over holding on savings. Inflation makes products expensive and living standards out of reach for many people.
High rates of inflation can wipe away your savings and make business impossible. Real wages fall and money loses value during inflation. But if you own rental property, it’s much easier to avoid the harsh side effects of inflation.
Rent increases along with the price of other goods during inflation. Your spending power strengthens or remains much the same if you earn rental income. Your rental income provides a cushion for you.
Another advantage of real estate investments during inflation is to protect your savings. If you invest in real estate, you should try not to resale during inflation. You hold the property and wait until the economy improves to find a premium buyer.
5. Long Term Financial Security
Debt and financial issues can cause often cause issues with mental and emotional health. Many people around the world deal with financial stress at a point in their lives. The American Psychological Association says 72% of Americans suffer money problems.
The benefits of investing in real estate provide you a chance to secure their future. A steady and reliable source of income brings financial freedom for many years. Even if you lose your job, you can depend on your rental income.
You’re also free of financial stressors because you made the right financial decision. This gives you peace and allows you to focus on growing your income. You also feel safe because you know your investment is increasing in value.
6. Control Over Your Investment
Many people that are employed fear getting sick or losing their job. Stock investors are also ever worried about market changes. The destiny of a stock investor is also tied to corporate decisions.
Real estate is beneficial because you control your investments. You’re responsible for its success or failure and you don’t worry a lot once you buy your first property.
As a real estate investor, you hustle to find the best deals. If you’re selling, you get to decide on your favorable selling price. If a tenant moves out, you advertise to find another one.
In short, you’re the boss and driver of your financial success. You can expand your net worth in a few years with the right moves and partners
Start Reaping the Advantages of Investing In Real Estate
Now that you know the advantages of investing in real estate, it’s time to take steps to start investing. The first step is to know as much as you can about the real estate industry. Read books, blogs and magazines and also Youtube videos about real estate.
You can also network and attend many real estate investment clubs. Find real estate professionals to learn ways to start investing in real estate. Above all, find credible and experienced resources and mentors to help guide and assist you. For more tips on real estate and investing, check out the rest of our blog.