There are several advantages to real estate investing, so it’s no wonder why so many investors have put their money into properties over the recent years. Unlike the stock market, real estate is more predictable, and while it is still prone to fluctuations, it is a better option for the risk-averse investor. Apart from that, real estate is the solution to financial freedom. If you’ve ever wanted to earn passive income and never have to deal with workplace politics (get ready to say goodbye to the nine-to-five), real estate is the answer.
With that said, real estate is one of the most ideal investments you can undertake. Not convinced? Below, you will find a few of the reasons why you need to buy residential real estate now:
#1 Passive Income
Ask any investor and they’ll likely tell you that they’ve invested in real estate due to its passive income. When you run a rental property, you can expect to earn consistent rental income to pay for your expenses or to set aside as extra cash. This, of course, is only true if you purchase a property in an area with a demand for rentals. If you choose your property properly, you’ll be able to benefit from passive income and even save up to invest in more real estate!
Although you will have to deal with the day-to-day details, such as repairs, maintenance, and more, it’s nowhere near as demanding as other investments. You can even put it on “autopilot” and hire a property management firm to help you manage multiple rental properties at once.
Real estate is also a wise investment for retirees. When it’s time to retire, you’ll be able to supplement your pension with your rental income, and not have to rely solely on the retirement funds you’ve saved up. In other words, it provides passive income that you can count on for years to come.
#2 Diversification of Your Investment Portfolio
Keep in mind that in investing, you should never put your imaginary eggs in a single basket. In other words, you shouldn’t stick to only one investment like stocks. You should strive to have a diverse portfolio in order to avoid risk since the stock market has a tendency to be very volatile. Investing in real estate is a great way to mitigate that risk.
You’ll also be able to diversify your investments by property type. If you’ve decided to become a residential real estate investor, you can buy a humble home, condominium unit, multi-family, and more. You can even buy a home abroad and turn it into a short-term rental or Airbnb! If you eventually decide that you want to invest in commercial real estate, you will have endless options.
#3 Tax Deductions
Business owners can benefit from tax write-offs, and since real estate investments are considered as businesses, you’ll be able to benefit from multiple deductions, too. In fact, you can deduct nearly all of the costs that you incurred. As a rule of thumb, any amount that went into your real estate investment can be considered a business expense – common examples are property management fees, legal fees, and mortgage interest, among others.
You can even deduct the costs to travel a potential real estate investment. In other words, you can deduct the costs you incurred (e.g. lodging and gas) while you were still searching for a residential rental property. Your deductions will be so substantial, you’ll feel like you didn’t pay a penny for the entire year.
Here’s a breakdown of the tax breaks you can expect:
● Mortgage interest
● Property taxes
● Insurance premiums
● Property management fees
● Professional fees
● …and many more
Pro Tip: Partner with a property management company to ensure that you maintain detailed records of all rental-related costs. Keep in mind that you can’t claim a tax break if you can’t back it up.
#4 Protected From Inflation
Real estate investors can benefit from inflation since it results in a substantial increase in their rental income. This investment is a hedge against inflation as it guarantees that rental rates will go up alongside the cost of living. If you were to invest in real estate, you can continue to benefit from a consistent cash flow even over the occurrence of inflation. The costs of services will rise, as well, but you can always deduct those expenses from your taxes. You’ll be paying more for services, but you’ll also be generating greater rent. In other words, you’ll be in line with inflation.
Plus, people will be less willing to get a mortgage, so they’ll probably end up renting. Plenty of people will need a place to stay – as this drives up the demand, you’ll also be able to drive up your rental rates.
#5 Be Your Own Boss
Want to work on your own time? Bid good riddance to your boring workplace and be your own boss. You’ll have complete control over every aspect of your real estate investment. But remember, you may be able to call the shots, but this also means that you’re responsible for your failures, too!
Want to raise your rent? Want to turn your property into a short-term rental home? Or perhaps you want to delegate your duties to a property management company? You make the decisions, but do keep in mind that your decisions can make or break your rental business.
If you need a hand, consider hiring a property management agent. They’ll take care of everything, but you’ll still have the final word when it comes to what they do to your residential rental property.
There’s no doubt that real estate investments are profitable. Like other investments, real estate comes with risks, but it’s comparatively more stable than others. You’ll be able to generate great returns, say goodbye to the boring nine-to-five, take advantage of tax breaks, and more. This, of course, isn’t guaranteed – you still need to commit yourself to property management and get things right. But overall, real estate is a wise choice for anyone who wants to put their money into a worthwhile investment.