From how much you’ve heard about it, investing in real estate has probably crossed your mind more than once, so if you want to finally understand why real estate investing is so popular as the best way to make money, continue reading!
Real estate investments have been around for ages and have continued, throughout all these years, to be one of the best investment choices. This is because real estate investing is a great way to make money, and who doesn’t want to make money? Real estate investing is great because of the following reasons:
- Tangible investment
- High return and low risk
- Tax benefits
For most people, investing in something that you can see and touch is very important. Buying land or an income property is great as an investment for the long term. In this fast-paced economy, change is bound to take place in the market; this includes the investment market, and here owning an investment property will always leave you with value in your hands.
High Return and Low Risk
When compared to the other popular choice for investment, stocks, real estate investing is a much better investment strategy. This is because it provides you with more control and has less risk volatility, which is why it is known as a low risk investment. In stocks, the risk usually remains constant, so people tend to lean towards real estate investing where home prices rise as time passes by. Your property investment will gain a greater value in time due to real estate appreciation, and the longer you keep it, the risk of loss will go down, while your returns will go up, providing you with a steady positive cash flow.
Rental properties give a real estate investor a steady cash flow. The tenants of your rental property pay rent each month, and this stream of rental income flows directly to you. Of course, in order to maximize your rental income, you want to choose the right rental property, which is the most important investment decision to make in order to insure a positive cash flow. Your real estate investment properties should be giving you good returns. This rental income can provide you with the means to reinvest and expand your real estate business.
One of the major differences between real estate investing and any other investment is appreciation. Appreciation basically means that the longer you keep an investment property, the more its value will increase. The history of the housing market has continuously proven this, and even in past housing market bubbles, appreciation always makes a recovery in the medium to long run. In real estate investing, your rental income will keep pace with inflation, automatically adjusting the market price of your income property. This supports the concept of real estate appreciation. So, when conducting an investment property analysis, you should keep your eyes open for the appreciation potential of the specific rental property because this will give you a better understanding of how it will do in the future real estate market.
Tax Benefits of Real Estate Investing
There is a number of tax deductions you can get with rental properties, including on mortgage interest, cash flow from investment properties, operating expenses and costs, property taxes, insurance, and the one investors are most excited about: depreciation. The great thing about depreciation in real estate investing is that you’re getting a tax credit on the cost of an asset that is usually going up in value. It’s a win-win situation where even though you’re receiving a tax credit based on depreciation (the assumption that as time passes, an asset’s value goes down), the property investment’s value is going up. Now focusing more on the tax deductions you can get on any rental expense: real estate investors have access to numerous rental property tax benefits ranging from interest to insurance and repairs. A lot of people get in the real estate investing game because of these benefits!
You can use leverage to build your wealth. Leverage is referring to the fact that you can take out a mortgage to buy an investment property (only pay a small fraction of its entire cost) and reap the benefits of the entire real estate investment. You can get the same rental income you’d receive if you invested the entire purchase price even though you only put down a small fraction of it. What this means is that you have more money to do more real estate investing, which provides you with a more diversified portfolio of income-producing properties. However, in order for this to work, you need to have the optimal rental strategy to help you select real estate investments that will provide you with positive cash flow. Leverage is a tool that needs to be monitored and managed well in order to make money as a real estate investor.
To Sum It All Up
The bottom line is that in real estate investing, you have more control over the asset (the investment property) in which you can take advantage of any rising opportunities easily (for example, buying a property at a low price but selling it at a high price). Real estate investing is a safe financial investment and one that will help you build your wealth. It is clearly an amazing investment for so many reasons, but you can’t just jump into real estate investing without putting in some time and effort. It is the best way to make money, and so to help you figure out how to do that, Mashvisor provides you with tools which assist you in making the best investment property choices. With the click of a button, Mashvisor will give you an overview of the investment opportunities in any city, the key calculations for any neighborhood, and interactive filters to help you find the best investment property. So, if you’re still on the edge of making a real estate investment decision, make sure to utilize the resources we’re providing you with!
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.