Real Estate Careers Real Estate Investing: Why Is It Such a Great Choice? by Nasser Mansur December 7, 2017February 7, 2019 by Nasser Mansur December 7, 2017February 7, 2019 Real estate investing is considered by some to be a shortcut to the world of riches. What most real estate investors don’t know is the large number of ways that you could be making money in real estate and the numerous benefits that make real estate investing more distinct than any other type of investment out there. What Makes Real Estate Investing So Great? Have you ever wondered why real estate investing is such a great choice for making profits? Or why most people who become rich achieve their riches through real estate investing? There are several advantages to real estate investing that make it stand out from other types of investments. But most importantly, real estate investors make a lot of money. And one of the best qualities of real estate investing is the numerous ways through which a real estate investor can use his/her creativity to make money. Related: 9 Expert Tips for Real Estate Investing So, what are the different ways that you can make money in real estate investing? Rental Income One of the main reasons why many people become real estate investors is to own a rental property. Rental properties, when managed right, produce a considerable rental income for their owners. Who wouldn’t want to generate a profit on a monthly basis? Not much explanation is needed for this one. Buy Low, Sell High Another great aspect of real estate investing is that the housing market is fairly easy to predict, making it easy to make smart investment decisions to make a financial profit. Good real estate investors pay close attention to the housing market and know how to choose properties that are for sale at a price that is lower than the market value, and they know when to sell those properties when the market value grows, cashing in on the profits. Additionally, in real estate investing you get the chance to fight for more profits, also known as deal negotiations. You can also hire a real estate agent to do the negotiating for you in order to maximize your profits. Equity In real estate, financing your investment through a mortgage or a loan can be very beneficial for you. If you finance a rental property, in particular, you will be increasing your equity with every mortgage payment that you make. For example, if you purchase a rental property with a 25% down payment, every mortgage payment that you make will increase your equity. The best part is, you won’t be paying the mortgage out of your own pocket, but your tenants will pay it through the rent, and you will also make a profit along the way. Leverage There are two ways that real estate investors can benefit from leverage in real estate investing. First, leverage will increase your return on investment. For example, if you put a 20% down payment on a property, the rental income that you receive will still be based on 100% of the value of your property, which makes it a great return on investment for the 20% you put down. To illustrate more, imagine owning a rental property that is worth $200,000, and you charge $1,500 rent on it, while paying $1,000 per month towards mortgage and taxes. You will still be receiving $500 monthly profit on a $40,000 down payment. That is a $6,000/year, translating into a 15% cash on cash return, a rate that you won’t be able to achieve easily and in a secured way in the stock market. Second, once the time comes for you to sell the rental property, leverage allows you to make a profit on the full selling price of the property. Consider the previous example, and now you want to sell the property, which is worth $240,000 at the current market value. This means that you will be making a profit of $40,000, which is equal to the amount of money you initially invested in the property. That is a profit of 100% minus the principal payments that you made on the $160,000 mortgage. In real estate, the bigger the leverage, the greater the return on investment. Rental Options Real estate investing opens up a number of great options for your investment. When it comes to rental properties, you can make considerable profits from renting out different types of properties using different rental strategies. For example, you are able to rent out smaller units, rooms, or even basements to generate an extra source of rental income. You can also modify and redesign your investment properties to suit your rental strategy, turning a single-family house into a duplex or a triplex, allowing you to increase your rental income. Real estate investors can also invest in commercial real estate and rent out their properties to businesses, which usually generates higher return on investment, and they get to ask for greater rent than with residential properties. They also come at a lower risk as businesses are less likely to move out. Tax Benefits Taxes are usually the downfall of any investment. But in real estate investing, there are a number of great tax benefits that come with it. While this might not be the case in all states, generally, you are able to deduct your mortgage interest from your rental income, allowing you to make a tax-free profit. Additionally, real estate investors can deduct the costs and expenses of improvements and home renovations from their taxes as they are considered business expenses of running a rental property. Related: All You Need to Know About Rental Income Tax Refinancing In real estate investing, you can sometimes refinance your rental property in order to lower your mortgage payments without affecting or lowering the rent. This leads to you generating more cash flow from your monthly rental income. Real estate investors can use this technique to save up money for property maintenance, save up for a deposit on a new rental property, or simply generate and enjoy a higher passive income. Related: How to Become a Real Estate Investor Using Mashvisor Bottom Line Real estate investing can be very intimidating for people who do not know enough about real estate and its benefits. We highly recommend for everyone to consider the option of becoming a real estate investor to start making money in real estate. If that option is what drove you to this article, then we highly advise that you check out Mashvisor, a platform which is designed to enable real estate investors to find the best investment properties in the US housing market and make the best investment decisions based on accurate and reliable data and estimations of return on investment. Start Your Investment Property Search! START FREE TRIAL Start Your Investment Property Search! START FREE TRIAL EquityFinancingRental StrategiesTax Benefits 0 FacebookTwitterGoogle +PinterestLinkedin Nasser Mansur Nasser is an experienced content writer with a degree in English Language and Literature. He loves writing about all aspects of the real estate investing business with focus on market and property analysis and the best sources which every real estate investor needs in order to succeed. 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