When it comes to investing your hard-earned money, nothing quite compares to the stability of buying real estate. Real estate is an excellent option if you want to invest your money in something that will provide a good return on investment. Keep reading for seven reasons why investing in real estate is a smart move for your future.
1. It’s a tangible asset
When you invest in real estate, you’re investing in a physical asset you can see and touch. Contrary to stocks and bonds, which are intangible. Investments in tangible assets tend to be considered more stable and less volatile than investments in intangible assets.
2. Home values typically appreciate over time
Real estate is a long-term investment, which means you can expect to see it appreciate over time. This appreciation can give you a nest egg for retirement or help generate income if you rent your property. Kingston stat for prices over 5-10 years. You may also consider ‘forcing’ appreciation, whereby you renovate or improve the property to increase the home’s value quicker than natural appreciation, giving you a greater return on your investment.
3. You can leverage your equity
As you pay your mortgage balance (or renovate as mentioned above), you can leverage the equity in your home to further your investments. Equity is the difference between your home’s value and the amount you owe on your mortgage. The equity is your profit.
If you decide to keep your home, you may be able to take out up to 80% of your home’s value as a loan, which you can then use to invest in more real estate. This is a great way to grow your portfolio without waiting for the funds for a down payment.
4. Opportunity to earn passive income and cash flow
If you decide on the buy-and-hold method of investing, you can rent out the property and earn passive income each month. This makes investing in real estate unique, as most investments do not provide cash flow.
5. Tenants can help pay down your mortgage
Not only will you earn passive income, but your tenants will help pay down the mortgage on your home, increasing your overall equity.
6. Eligibility for tax deductions
Some expenses incurred to maintain/manage a rental property can be written off against the income your property generates/your overall income, depending on how the property ownership is structured (i.e., personally or under a corporation). Examples include utilities, internet, and depreciation. In turn, this reduces your tax liability and increases your profits. Always speak with your accountant to determine your eligibility to write off certain expenses.
7. Retirement savings plan
Don’t have a pension? Investing in real estate could be a good option for you. As mentioned, real estate values tend to appreciate over time. If you purchase a property using the buy-and-hold method, you can sell the property when you retire and use the profits as your retirement savings. Another option would be to refinance and access the equity for cash.
Who should invest in real estate?
- Investors looking to diversify. If you are already invested in the stock market, branching out into real estate is a great idea. If you have money invested in stocks and real estate, you’ll lessen the financial blow if one industry plummets.
- Anyone looking to start investing. Real estate is a great place to start investing money and is often considered a ‘safe’ investment, although, as with any investment, there are still some risks. Be sure to do your research.
- Investors looking for cash flow. Most investments don’t offer the added stability of cash flow. If you decide to take the buy-and-hold approach, you will earn cash flow each month from your tenants.
As you can see, investing in real estate offers returns with lower risks compared to other investments. Real estate investing has been around for centuries, and many investors have reaped the rewards of investing in this sector. Real estate can provide a reliable stream of income over time and also allows you to diversify your portfolio. Don’t miss out on an excellent opportunity if you want to grow your wealth and ensure financial security for your future.
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