Real Estate: 8 Reasons Why You Should Invest in real estate
What is Real Estate?
Real estate is a property (consisting of land or buildings) or a vast collection of properties. On the other side, the real estate business is the process of buying, selling, or renting a property, building, home, or land. Real estate agents assist homeowners, businesses and investors buy and selling all four types of properties.
The real estate business can be divided into loan servicing, residential and commercial properties, etc. Examples of residential real estate include undeveloped land, houses, condominiums, and townhouses; commercial real estate is office buildings, warehouses, and retail store buildings; and industrial real estate includes factories, mines, and farms.
8 Reasons Why you should invest in Real Estate
1. It’s a Tangible Asset
When you invest in intangible assets, like stocks or bonds, all you have to show for your investment is a piece of paper. You don’t have ownership of anything. If the stock market crashes, your piece of paper could be worth nothing.
If you invest in real estate, you have a tangible asset. Values may increase and decrease throughout the years – there’s no guarantee they will not fall, but tangible assets are worth something. You still have a piece of property to sell should you need to get out of the investment.
Since it’s a tangible asset, it takes a little longer to sell since you need to work out a deal with a buyer and go through all the legalities. Still, in the end, you’ll walk away with your initial investment and hopefully a capital gain if all goes according to plan.
2. Real Estate Values Usually Appreciate
If you invest in a home for long enough, it will appreciate. While things happen, like the housing crisis of 2008, they aren’t common. Most of the time, buildings and land appreciates, making your investment worth more than you paid.
You can also force appreciation by renovating or improving the property. Whether you buy an undervalued property and fix it up to sell or renovate a rental property, you can increase the home’s value faster than natural appreciation, giving you an even greater return on your investment.
3. You Can Leverage Your Equity
As you pay your mortgage balance down and/or renovate the property to increase its value, you can leverage the equity to further your investments. The equity in your property is the difference between your home’s value and the amount you owe on your mortgage. Any difference is your profit.
If you keep the home, you can’t use all of the equity, but you may be able to take out up to 80% of the home’s value, using what’s left to invest in more real estate. This is a great way to increase your portfolio without waiting until you have enough money saved for a 20% – 30% down payment for another home.
4. Real Estate Provides Cash Flow
If you invest in a buy-and-hold property, you can rent it out and earn monthly cash flow. Most investments don’t provide cash flow. At the very least, they may provide dividends, but you only receive them quarterly or annually.
Real estate can be a passive investment depending on how you manage your property. If you work with a platform like Roofstock Marketplace to buy your investment property, they can match you up with a property management company. This is important if you invest in long-distance real estate. This means you don’t have to do much work and enjoy the monthly passive income and the capital gains when you sell the property.
5. You May Be Eligible for Tax Deductions
When you own investment real estate that you live in, you get very few deductions. Most homeowners don’t itemize their deductions, so they can’t take advantage of real estate savings. Even if you itemize, you can only deduct your property taxes and mortgage interest in most cases.
When you buy and hold real estate, renting it out, you own a business rather than just an investment. The IRS allows you to take many deductions just like you would if you owned a brick-and-mortar store.
Any expenses you incur to maintain the property, handle business, or even conduct business (buying a laptop, traveling to the property, etc.) can be written off on your taxes. This reduces your tax liability and increases your profits.
6. It’s a Great Retirement Savings Plan
When you invest in real estate, it’s not liquid. You invest in it for the long term. As time passes, you earn more equity in the home. When you’re in retirement or near it, you can sell the property and use the profits to get you through retirement.
Many call it a forced retirement plan. You aren’t putting money away in a 401K or IRA, but you pay the mortgage monthly. If you rent the property out, your rent should cover the rent and other expenses incurred, which means you invest in your retirement without contributing money each month.
Talk with your tax advisor before you sell the property, though, so you can minimize your tax liabilities when you sell the home. Since it’s not a principal residence, you don’t get the capital gains exclusions, but there are other ways to reduce your tax liability.
7. You Have Many Options
There’s more than one way to invest in real estate. Many people buy and hold real estate, as it provides a nice monthly cash flow and can help you save for future goals. If you use a platform like Roofstock Marketplace, they provide you with all the information you need to choose a property, including the financial information.
If you are a fixer-upper type person, you may enjoy fixing and flipping. This involves finding undervalued properties, rehabbing them, and selling them. This usually happens within six months, so you don’t have many carrying costs. You can turn around and buy another property, doing it as often as you want until you reach your earnings goal.
8. You Don’t Need a Lot of Money to Invest In Real Estate
Many assume they need a lot of money to buy real estate. You don’t. When you find the right property with the help of a platform like Roofstock Marketplace, you’ll have an easy time getting financing if you have decent credit and have your debts under control.
When you can get traditional financing, you need only 20% – 30% of the sales price to put down on the home. This means you can leverage your investment – investing in an asset worth much more than you invested. If the property value increases, you earn an even more significant return on your investment.
How can I invest in Real Estate?
There are many ways to invest in real estate. All you need is a suitable method with which you are comfortable that provides the information you need to make a solid investment choice.
Start your Real Estate Investments today with SOLITUDE REALTY!