From time immemorial, owning real estate has been associated with status, wealth and credibility. Along with gold, it was the safest way of securing one’s wealth. As we stepped into the modern era, a lot of other investment options developed. Options like stocks, bonds, fixed deposits, mutual funds digital or crypto currency gave investors multiple options of parking their money. But out of all of these, Real Estate still remains one of the most secure and beneficiary avenues for a long term, profitable form of investment.
Real estate is a necessity since everyone needs a place to reside, and the investment in real estate solves this problem and secures the future. This article aims to discuss and examine Real Estate benefits, how and why it is considered a good investment.
Appreciation of Value
Real estate values always increase over time. With a good investment, one can turn an enormous profit when it’s time to sell. Rents also tend to increase with time, leading to higher cash flow. It is historically evident the longer you hold onto your real estate, the more money you will make. The housing market always recovers from bubbles and crises that cause home appreciation to slip. Following even the most uncertain times, prices always return to normal, and appreciation is back on track. In other modes of investment, like the stock market, the risk of loss is omnipresent, but real estate offers increased control over one’s investment. Property being a tangible asset can be leveraged to capitalize on numerous revenue streams while enjoying capital appreciation.
Cash flow is the net income from a real estate investment after mortgage payments and operating expenses are covered. Real estate provides a considerable ability to generate cash flow. A steady monthly rental income is an excellent incentive of passive income and offers long term financial security to the investor. In many cases, cash flow only strengthens over time as you pay down your mortgage and build up your equity. A good real estate investment generally provides you with 6% or greater cash flow.
Tax deductions on Real Estate can offset income and reduce overall taxes. There is no self-employment tax on rental income. At the same time, the government offers tax breaks for property depreciation, insurance, maintenance and repair expenses, legal fees and even interest paid on a mortgage. Real estate investors get lower tax rates for their long term investments. Reasonable costs of owning, operating and managing property are easily deductible.
A very significant benefit of Real estate investment is the ability to use Leverage by investing just a small portion of one’s own money and borrowing the rest of the money to buy a property. If you come up with a down payment from your savings and acquire a housing loan to cover the rest of the cost of the property, you can invest in prime real estate for as little as 15 % of the total purchase price. This means only a tiny fraction of your own money is invested in the property, but you still get to be the owner of the property. It also ensures you don’t put the entirety of your life earnings in Real Estate and save some for the possibility of emergencies.
Property being a tangible asset can be leveraged to capitalize on numerous revenue streams while enjoying capital appreciation. The high tangible asset value ensures everlasting security as there will always be value in Real Estate, unlike other investments such as stocks with low or no tangible value.
Real estate is easy to purchase, convenient to finance, gives tax advantages, improves your lifestyle and is devoid of any insurmountable financial barriers. Hence, Real Estate, even today, remains one of the most advantageous investment options.