Not sure if you want to leap into real estate investing just yet? Hesitate any longer and you’ll be missing out on the numerous benefits of investing in real estate.
With so many successful real estate investors already in the business, there is tangible evidence to back up all of the reasons to invest in real estate today.
Just as in any other industry, getting started in real estate has its risks and even a few disadvantages. Yet, so many people choose a real estate investment over every other form of cash investment. The reason is simple: the advantages of owning investment property outweigh any of the disadvantages.
So, what are the benefits of investing in real estate?
Benefits of Investing in Real Estate: Reliable and Steady Cash Flow
There are only a few industries out there which promise a consistent demand and can, therefore, offer reliable and steady cash flow. Real estate investing just happens to be one of them. People will always need a place to live, and when owning investment property, you are providing this service. With the right investment property, a real estate investor can have positive cash flow. This positive cash flow can go right into the real estate investor’s pocket, be used to increase the value of the real estate investment, or even go into funding and maintaining other investment properties.
Want positive cash flow? Learn How to Find Positive Cash Flow Properties in the US Housing Market.
Many successful real estate investors are even able to achieve passive income from this positive cash flow properties. A long term real estate investment with the right tenants, for instance, can eventually make passive income for a house investor. Either that or a real estate investor can choose from a variety of different passive income investments: REITs, real estate syndication, real estate crowdfunding, etc.
Tip: To find an investment property that will bring positive cash flow, a house investor needs to analyze the rental income, cash on cash return, and return on investment before investing in real estate. Use real estate investment tools like Mashvisor’s investment property calculator or Airbnb profit calculator to make this easier.
To start your 7-day free trial with Mashvisor and subscribe to our services with a 15% discount after, click here.
Benefits of Investing in Real Estate: Tax Advantages
Why does it seem that a house investor is somehow always making more money than everyone else? Well, one major reason is the tax benefits of investing in real estate. The tax benefits of real estate investing include a wide range of tax deductions for rental property expenses as well as depreciation.
So, if a real estate investor makes $50,000, he/she gets to keep much more of it than you would having made $50,000 in any other industry besides real estate investing. This is the government’s way of saying “thanks” to real estate investors who provide homes for the general population.
Tip: While a house investor can attempt to take on real estate property taxes alone, it’s always a good idea to seek advice from an accountant. You don’t want to miss out on hidden tax deductions and lose out on the possibility of getting a greater positive cash flow and return on investment.
Stay updated: How the 2018 Tax Reform Affects Real Estate Investors
Benefits of Investing in Real Estate: Leverage
Another reason real estate investors seem to make more money than other investors is leverage. The ability to leverage the money of others allows a house investor to make a greater return on investment. Let’s compare the return on investment with that of a stock investment which would require a 100% cash investment:
A stock costs $100,000, which the investor pays in full. Within a year, the stock has made $20,000. The return on investment would be 20%, a pretty good return on investment.
An investment property in the real estate market costs $100,000. A typical mortgage covers 80% with a down payment of 20%. The house investor pays $20,000 of his/her own money for the investment property. Within a year, the rental property has made $20,000. The return on investment? 100%. No comparison really. While this is all hypothetical, leverage will still lead to a better return on investment every time.
Tip: A house investor has the option to shop around for investment property financing just as he/she can shop around for a rental property. Prep your credit score and visit a few local mortgage lenders to get the best rates. Don’t forget about all of your other financing options as well.
Benefits of Investing in Real Estate: Mortgage
While you just learned how much a house investor can actually benefit from an investment property mortgage, some will still try to tell you that needing a mortgage is a con of real estate investing. Sure, the process of approval for an investment property mortgage can take time, and you’ll be sick of paperwork when it’s all over, but these small inconveniences will never overshadow the kind of return on investment a mortgage can bring.
Besides this, with the right rental property and financing strategy, tenants will be paying your mortgage anyway! This will lead to increasing equity and net worth month to month for a house investor.
Tip: In order to make sure your rental income covers your mortgage payments and still allows you to make money in real estate, know where to look for what we call a positively geared investment property. Locations such as rural town centers or investment properties such as blocks of townhomes can be the best places to invest in real estate for positive cash flow.
Benefits of Investing in Real Estate: Real Estate Appreciation
All the while a house investor is making positive cash flow and even passive income, he/she is benefiting from the rental property in another way: real estate appreciation. As time passes, the value of a rental property is bound to increase, whether the house investor forces real estate appreciation through repairs/renovations or simply holds on to the investment property. Real estate appreciation allows a house investor to get a great return on investment upon selling, and little work may be involved in the process.
Tip: While usually not considered essential to investment property analysis, it’s a good idea to calculate real estate appreciation. Why not hit every corner and be sure that you chose the best investment property in the best place to invest for real estate appreciation?
Learn more: How to Calculate Real Estate Appreciation
Benefits of Investing in Real Estate: Inflation
Inflation is a term which most fear, well, except real estate investors. Possibly one of the best reasons to invest in real estate is because it provides what is called a “hedge against inflation.” Basically, real estate investors aren’t negatively affected by inflation. As inflation occurs, rents go up, real estate appreciation occurs, and a real estate investor reaps the benefits. At the same time, fixed mortgage payments don’t change, and cash flow only increases for a house investor in case of inflation. Just another way real estate investors are making more money than everyone else!
Tip: Finding the best location means studying the economy of a city before buying investment property there. Check on the trends of rent prices and investment property values before choosing a location. You can easily get this information by reading Mashvisor’s blogs on different real estate markets.
Benefits of Investing in Real Estate: Variety
Getting started in real estate investing is great for anyone because of the variety it offers. Whether you’re a beginner real estate investor who’s looking to make passive income or become a landlord or you’d prefer the stock investment style of investing your money, there is an option in real estate investing for you.
Tip: To make sure you find the right real estate investment strategy that’s suited for you, review your financial plan as well as how much time and effort you wish to invest in a rental property. Once you have a real estate investment strategy in mind, be sure it works with the location and investment property of your choice.
Benefits of Investing in Real Estate: Control
The last of the benefits of investing in real estate is how you can control your success when investing in property. Not only is the real estate market pretty stable, but there are so many factors in the hands of the real estate investor that affect the success of a rental property. Choose the perfect location and the right investment property, find the best tenants, force appreciation, etc. All of these decisions are made by you.
Tip: Want to get off on the right foot with your real estate investment and enjoy the benefits of investing in real estate? Then use Mashvisor’s tools to help you find the best real estate investment. To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
With so many reasons to invest in real estate, it’s no wonder why there are so many real estate investors already: from entrepreneurs through retirees to people in their 20’s. Anyone can invest in real estate and enjoy the benefits that come along with owning investment property.