There comes a time in every person’s life where the question “how to invest money wisely” begins roaming around in their head. Unless you’re a millionaire or the heir of a wealthy family, then you should start to search for the answer to this question now.
One of the best ways to invest your money wisely is through real estate! You as a real estate investor can engage to connect several powerful forces to build wealth for yourself and your family. You win the game when your passive income reaches a point where it, by itself, gives you financial independence. So, why are real estate investments the best way to invest your money wisely? Let’s find out!
When you become a real estate investor, you’ll be using your money to acquire things that offer the potential for profitable returns through one or more of the following:
1. Rental yield: This is the percentage yield from direct rental income, and it can be calculated as either gross or net. Experienced investors prefer to calculate the net rental yield which takes the expenses, taxes, and other costs into account, and divides by the property value/cost. It could be a negative cash flow, as it doesn’t take mortgage payments into account. For this reason, many real estate investors prefer to look at cash on cash rental yields.
2. Appreciation: Rental properties normally appreciate in value with inflation. Increased value can mean sale and reinvestment in higher value properties, or provide an equity line of credit to use for other investments.
3. Inflation-proof investment: Rents usually increase with inflation, while mortgage payments on the property remain stable. This increases cash flow, without the increased expense of holding the property. When inflation goes up, it can also mean more renters as mortgages become more expensive for average consumers. More renters increase demand, so rents can increase.
4. Leverage: Using leverage, while being careful to buy properties with good rental yields, provides greater returns. Of course, all leverage involves risk, so a successful real estate investor must understand how leverage impacts their real estate investments.
As we said early, if you’re wondering how to invest money wisely, real estate is the answer. One of the most commonly stated reasons that people give for investing in real estate is that they are seeking out financial freedom. The decision to begin investing in real estate is a personal one, and it is absolutely recommended that you make sure you and your family are 100% committed before deciding to move forward in doing so.
You see, a commonly asked question that people ask is “Can I invest in real estate if I have a full time job?” Like any other job that requires commitment and hard work, real estate is no different. Of course, the answer is: “YES, you can invest in real estate even while working a full time job.” However, there are hundreds of ways to make money in real estate. Some of these techniques or strategies might require forty hours a week, while others might only require forty hours per year. The amount of time it takes to grow your real estate business largely depends on your investing strategy, your personality, your skills, your knowledge, and your timeline.
Real estate is a safe type of investment
How to invest money wisely does not only depend on the amount of cash flow of returns you are receiving but whether or not the investment is a safe one. You want to search for ways to invest your money which are risk free or at least the risks are very low. In real estate investing it’s almost impossible to lose everything. Why? Because you are investing in physical assets. Real estate is a safe investment and worth taking into consideration if you are looking for a way of how to invest money wisely.
Real estate investing financially secures you
It’s important for any type of investment to bring you financial independence and security not only in the short run but in the long run as well. Real estate investing does just that! That is why it’s one of the best ways when wondering how to invest money wisely. One of the great advantages of real estate is that it provides investors with long term financial security. When you have a steady flow of cash in progression, the rewards of this investment bring on financial rewards for a long time. Having a rental property can give real estate investors a sense of security because of the property’s appreciation in value over time.
The glory of tax benefits
Last but certainly not least is the gift of tax benefits that comes from real estate investing and buying an investment property. For instance, your cash flow is tax-free, and property investors can deduct mortgage interest, property taxes, operation expenses, insurance, and depreciation from their taxes. Cool, right?!
So, the next time you’re sitting wondering how to invest money wisely, do not hesitate and go for real estate. The world of real estate investing is so vast and diverse that you are bound to find exactly what you are looking for. Meanwhile, make sure to equip yourself with all the right real estate investing tools to make the smartest and most profitable real estate investment decisions.
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