In the following article, Summit Way Realty dives into the top 9 reasons why to invest in real estate. Real estate has long been considered one of the best assets to invest in because of all the different benefits. With that said, if you are considering investing in real estate, the top benefits on why to invest in real estate are listed below.
Benefits of Investing in Real Estate
Is investing in real estate worth it? From building equity to competitive ROI, Summit Way Realty covers it all.
1. Build Equity & Wealth
One of the best things about investing in real estate is it allows you to build both equity and wealth. As the mortgage gets paid down, you’ll build equity. In turn, you’ll eventually start generating wealth. Bear in mind that how soon a person starts generating wealth depends on several factors, such as how big of a mortgage they take out, how soon they pay it down/off, as well as what type of property they’ve invested in.
Sure, there are a lot of other ways to generate wealth, as well as build equity. The truth is most other forms of investment don’t allow you to build up as much equity and wealth as real estate. It is often said that more people have become wealthy in real estate than in any other market.
2. Passive Income
A lot of people talk about passive income, and how there are many different ways to generate it. However, not many methods of investing allow a person to truly generate passive income. That’s not the case with real estate.
One of the benefits of investing in real estate is the investors can maximize revenue, or they can choose to cut expenses when they own a piece of property. Because investors can predict cash flow, a passive income source is created.
Pro tip: Make sure to consider inflation when buying a property that will be rented out. Keep money aside for emergencies as well. This is how real estate owners can ensure they have a positive cash flow.
3. Portfolio Diversification
Although some investors might have their money tied up in stocks, gold, and other assets, it’s always good to have a diverse portfolio. Many investors believe in having a diverse portfolio because if one investment takes a hit, then the other investments can keep them in the green. However, it’s important to invest in “safe” assets, and it is possible to acquire a lower risk of real estate assets.
When you invest in real estate, you’ll be expanding your portfolio. Even if you don’t have other investments, you can build up a portfolio of real estate investments. Sure, it can take a bit of time, money, and effort to diversify a real estate portfolio, but it tends to be well worth it in the long run.
4. Cash Flow
Investing in real estate means creating a consistent flow of cash. Cash flow is the income that is left over after operating expenses and mortgage payments are made. As time goes by, your cash flow will become stronger because the mortgage will be lowered due to being paid down, as well as increased equity.
5. Tax Breaks
Continuing our list of the benefits of investing in real estate is tax breaks. There are tax breaks real estate investors can take advantage of. The tax breaks that an investor will qualify for depends on several factors, such as where they live, how many properties they own, the types of real estate they own, and where those properties are located. However, the good news is that most real estate investors, both small and big players, enjoy a tax break or two.
6. The Ability to Leverage Real Estate
Real estate is a tangible asset, which means investors can leverage it if they need to borrow money or get their hand on capital. Financing is readily available to those who own real estate, but there are other criteria they may have to meet to secure financing. Nonetheless, if you own real estate, then you will have powerful leverage to use to your benefit.
7. Property Appreciation
Appreciation is another way real estate investors make money, and it’s another one of our reasons to invest in real estate. As time goes by, real estate tends to increase in value. If you make a good real estate investment, then you might be able to generate a huge profit by selling it off. The bottom line is when a piece of property goes up in value, then selling it off might be a good idea.
8. Inflation Hedge
When the economy expands, then rent tends to increase as well as prices of products/services in most markets. Furthermore, this results in capital values becoming higher. What this means as an investor is, you’ll have an asset that serves as a hedge against inflation. When inflation increases and an investor’s operating expenses increase, they may consider passing some of the costs onto their tenants.
It’s worth mentioning that other forms of investment don’t typically serve as a strong hedge against inflation. If anything, some investments take a major hit when inflation happens. In turn, the chances of losing money become higher.
9. Competitive ROI
Real estate offers competitive returns on investment. The goal in real estate is to buy low and then sell high or to make money from renting properties out. Whatever an investor decides to do, the chances are they will see a return on their investment. Let’s not forget to mention there are a lot of different ways to generate income with real estate, which is why the market offers competitive returns.
Additionally, when it comes to ROI, real estate can deliver even during challenging times. Is real estate the safest investment? Sure, the market can hit hard times, but time after time the market has recovered. This means you have a good chance at making positive returns on your real estate investments over the longer term.
When it comes to investing in real estate, there are a handful of drawbacks. Why invest in real estate? The benefits outweigh the drawbacks. As you can see from the above, there are plenty of reasons why it’s a smart idea to invest in real estate. If you or someone you know is ready to invest in real estate, contact Summit Way Realty! Our agents are here to help you find the properties you are looking for to help diversify your portfolio.
