Most people take the conventional route for their investment options, such as mutual funds, stocks, and bonds. It’s because these options usually guarantee a 5 to 7% return. Simultaneously, no investor has much control over the way the stock market functions.
On the other hand, today, you have passive investment choices that enable you to have some control and increased return. And one such option is real estate investment. It’s also the best example of an asset that provides many income streams.
According to Paul Haarman, real estate can result in passive earning for an investor in many ways. It includes:
- Cash flow
The concept of cash flow is simple! When you buy a rental property as a real estate investment, typically, tenants pay rent monthly. The rent expense is more compared to the mortgage payment per month. And the difference in the mortgage payment and rent generates an immediate and consistent cash flow.
Selecting the apt market for investing is essential for long-term, successful real estate investment. So, before seeing the properties, it is necessary to look at a community's potential growth and check others investing in the same market. The metros are where 50% of Fortune 500 and 10% of Fortune 1000 companies have their headquarters. Hence, the metros have a flourishing health care industry. It is attracting people at a higher rate and has added more residents in recent times.
3. Tax write-offs
It’s interesting to know that there are several probable write-off scopes in real estate investments. And one of the methods that go underused is 1031 Exchange. It's a purchasing choice that enables you to switch investment properties and avert paying taxes on the sale's earnings. That aside, Paul Haarman says that there are the write-offs for the property management and travel expenses to and from a property, mortgage interest, and maintenance.
Usually, people cringe when they hear the word "inflation." However, for real estate investors, it can widen the possibilities of return. Compared to other types of investments, traditional loans provide a fixed interest rate that secures your bottom line. And as the market value grows with time, the investor has the scope to bump the monthly rent to double and maintain the return. Also, the loan amount won’t change to highlight inflation-managed value.
Hence, real estate investments don't just provide investor control but also creative means to enhance income. Passive investing implies that the property gets transferred to an ace management company to become easy to invest in another state or city. Turnkey property investments can result in instant cash flow and put aside the trouble of finding quality tenants and navigating maintenance.
Today, you will come across several real estate scopes where you can invest. The majority of the investments get considered as a "one-stop-shop." However, whenever it is done with real estate, a property can be a passive earning catalyst and generate more prospects.