Having some extra cash and thinking how to make it more? Stuck in the decision whether to invest in stocks or in real estate? When in doubt, always go for real estate investments because they are generally safer while offering returns not smaller than those offered by stocks. In order to convince you that investing in real estate is the best investment, here are 8 reasons to invest in real estate.
Reason #1: Monthly Income
The first among many reasons to invest in real estate is that it will provide you with a regular source of income – usually on a monthly basis. As a landlord, you will receive rental income from your income property, like any other part-time job with the potential of turning into a full-time job in the long run. If your mortgage is designed well and you are careful not to overspend on other costs related to your investment property, at the end of each month you will have a positive cash flow. This basically means that you will start making money from your real estate investment right away.
Reason #2: Real Estate Appreciation
Appreciation – or the fact that properties’ values generally increase (significantly) over time due to scarcity in land and other factors – is the second of the reasons to invest in real estate. Because of real estate appreciation, you will not only make money from your rental property on regular basis, but will also be able to increase your value as an investor and create wealth. Ultimately, if and when you decide to sell your property, it is nearly always the case that you will be able to sell it for much better than what you bought it. This leads to the next reason.
Reason #3: Hedge Against Inflation
In general, the prices of real estate properties and the land on which they are built tend to increase considerably faster than the general price level. Moreover, as economies grow (a main driver of inflation), the demand for real estate goes up, which in turn leads to an increase in rents. This means that the inflationary pressure will be passed on to tenants, while landlords will be protected from the negative effect of inflation through higher rental income. Hedging against inflation is another of the many reasons to invest in real estate.
Reason #4: Easy to Research and to Get Started
Contrary to popular opinion, you don’t have to be an expert on real estate in order to become a real estate investor. All you need is some basic research skills, elementary math capabilities, and a lot of common sense. And some luck… Researching the basics of investing in real estate and searching for real estate investment opportunities is quite simple nowadays and due to modern technology can usually be done from the comfort of your own home or office. There are plenty of real estate investing resources at your disposal such as books, websites, mobile apps, and of course networking. Moreover, instead of going around neighborhoods and collecting data on various properties to perform your real estate market analysis, you can obtain a simple tool as an investment property calculator at a minimal charge, which will turn into your best friend in real estate investing. Mashvisor’s rental property calculator is an excellent example which will save you lots of work and headaches while providing you with highly reliable analytics and comps. On the other hand, if you decide to go for stocks instead, you will need solid prior knowledge and understanding of financial markets, shares, bonds, and many more things. That’s not the case with real estate because everyone knows something about properties, whether single-family homes or multi-family properties. So, the ease of starting is another one among the reasons to invest in real estate.
Reason #5: Easy to Find Financing
If you need more reasons to invest in real estate, here is the next one. Debunking a popular myth in real estate investing, you don’t need to have a ton of cash in order to enter the business. Although you will need some hard work to obtain a mortgage, getting financing for a real estate property is relatively easy compared to other enterprises. Banks and other financial institutions LOVE real estate because there is always a guarantee that they will get their money back, regardless of whether you manage to pay your mortgage payments or default on them. Thus, the fact that you have access to financing options should be one of your reasons to invest in real estate over other investment options.
Reason #6: It’s Safe
#6 from our reasons to invest in real estate is that it is a relatively safe form of investment, which is one of the two most important features of an investment, together with return. The real estate market is by and large much safer than financial markets, despite the collapse a few years ago. Moreover, even if you are unable to rent out your property to tenants in the short term (which admittedly is a huge bummer), you still have a tangible asset which you can hold on to for better times or simply sell and try out with a different property or a different location.
Reason #7: Easy to Grow Your Business
Need yet more reasons to invest in real estate? Here’s another one. As a real estate investor, you have so many options to grow. After paying off some of the mortgage on your property, you can decide to sell it, pay the rest of the mortgage, and invest in a new, larger, more profitable income property. Or you can use the rental income from your current property to save for the down payment on a second property and then use the cash flow for the mortgage payments on the second one. Alternatively, you can use some of your income to partially renovate your investment property in order to rent it out for more money. So even though real estate investing rarely provides instant opportunities to become rich, it can bring you a lot of wealth in the long term, which is one of the reasons to invest in real estate.
Reason #8: Tax Benefits
The tax benefits which you can derive as a result of your income property are another of the numerous reasons to invest in real estate. Depreciation, tax deduction on the interest on the mortgage payment, deductions on the cost of repair, deductions on property-related travel, and others are some examples of how you can extract tax benefits as a real estate investor.
Needless to say, there are many, many more reasons to invest in real estate. Being fully in control, diversifying your investment portfolio, having an asset you can actually use, non-stop demand, passing it on to your kids, and having a diversity of sizes and prices are some additional reasons to invest in real estate which should not be overlooked. So, once you’ve made your decision to become a part of this exciting business, check out Mashvisor for a wide range of actual properties with specific figures across the US.