There are many reasons why buying real estate makes for an excellent investment. Tax advantages, great rates of return and leverage exist that help create your long-term wealth. Here are seven reasons to get started with real estate investing.
Historically Better Returns Than Stocks
Historically speaking, real estate minimizes the chances for loss when you hold property for an extended period of time. The equity you possess in your property rises as the market trends upward and your mortgage trends downward.
On the other hand, the stock market is more volatile and there are various factors outside of your control that negatively impact the value of your investment. Real estate is a tangible asset and provides more control over the revenue streams you can benefit from.
You’re allowed to take tax breaks when filing your tax return each year. There are deductions on:
- Property taxes
- Mortgage interest
- Cash flow from property investing
- Operating costs and expenses
You’re Holding a Tangible Asset with Real Estate
The fact that a house and land are tangible assets means this type of investment always holds value. A car decreases in value over time as it gets older. A stock can fall and leave you without anything tangible to hold onto. Not only are your real estate investments tangible assets but homeowners insurance provides another layer of protection against loss you simply don’t get with other investment choices.
No Employees Needed
This is a big factor to consider: Your real estate business can be run without the need for any full-time employees to manage. Employees come with many costs:
- Payroll taxes
- Paid vacations
- Benefits & retirement plans
- Maternity leave
- Sick days
You can start small on your own and then hire freelancers or contractors when you need help down the road.
Earn Passive Income the Rest of Your Life
This is most likely one of the top reasons to get started in real estate. You have the opportunity to generate residual income streams so you can focus on other important areas of your life.
Don’t fall into the trap of thinking it doesn’t require hard work to build passive income into your life, however. You need to treat your real estate activities as a business while you do the following activities:
- Search for properties
- Hire property managers
- Screen tenants
- Make repairs
These are active activities you must do in order to create the passive income you desire. Much of your success lies in your ability to lay out a definite plan of action. Decide on what type of real estate to invest in and identify your target market. This will help you find the best deals that match your goals and get you on the road to passive income streams.
Real Estate Provides Leverage
You can use leverage in real estate in a way that is far superior compared to other investment opportunities.
Real estate allows for the use of a mortgage to reduce the amount of capital you’re required to come to the table with. For example, you might only need $20,000 to buy a $200,000 property because the bank will give you the remaining $180,000 to get into the deal. On the other hand, you aren’t going to find a bank that lets you borrow $180,000 in order to get into a stock market deal. Leverage is a huge advantage in real estate.
Create Equity in Real Estate
While leverage allows you to get into a real estate deal more easily, equity allows you to profit long term via this investment option. The wonderful thing about building equity is other people typically build equity for you. Your tenants pay you rent, which pays down your mortgage for you. This fact, combined with rising markets, builds equity you can tap into at a later date.
Get started in real estate investing and begin experiencing these seven benefits in your life.
About The Author:
Eric Reyes is a passionate thought leader having been featured in 50 distinguished online and offline platforms. His passion and knowledge in Finance and Business made him a sought after contributor providing valuable insights to his readers. You can find him reading a book and discussing current events in his spare time.