There are a number of benefits of real estate investment. The benefits often outnumber than that of other investment strategies. Real estate investment can be dated back to ancient times, wherein a person used to buy a property and give it on rent to another person in exchange for a certain amount every month. Here are 7 reasons to invest in real estate.
- Rent-friendly inflation – It has been noticed that the property rates usually increase with inflation. This is because the demand rises during inflation, so the property rents also rise. Therefore, if you have a property and decide to give it on rent, you can actually expect higher rents during inflation. At the same time, if you have taken out a fixed rate mortgage while buying that property, then the monthly mortgage rate will remain the same throughout the loan term.
- Increase in tax deduction strategies – By being a real estate investor, you can convert your personal expenses to valid business deductions, since real estate investment is one kind of business. It means that your travel to manage the properties along with paying them who manage the properties, can be deductible, thereby increasing your tax benefits when you sale the property.
- It is an opportunity for forced savings – Surveys have revealed that the people of the nation are not very good at saving. However, if you purchase a property with rental purpose, then you will have to maintain the property. And, it will be a good investment in the long run and it will help you earn a steady source of income.
- Opportunity to take out an investment loan – Have you ever thought whether or not you can take out a loan for investment purpose, that is, to purchase stocks? The answer is ‘no’. However, for this type of investment, that is, real estate investment, you can actually obtain a suitable mortgage loan. It gives you the opportunity to buy a high value property, which is otherwise unaffordable to you, and you can get high return on your investment.
- Equity builds up with time – When you buy a property with the help of a mortgage loan, and you continue making the monthly payments, equity builds up on the property. So, after a certain period of time, a considerable portion of your monthly payment goes towards reducing the principal amount of the loan. And, equity builds up on the property really fast if you obtain a relatively short term loan.
- Local market insulation – Real estate markets can be called as insulated local markets due to the reason that property values in one location usually do not affect the values in other locality. Therefore, if you become a real estate investor and build an investment portfolio which is geographically diversified, then you can have a better return on your investment. By doing so, you can make yourself protected in spite of localized property value depreciation.
- Opportunity to have tax free cash flow – If you leverage your capital, then your cash flow should be tax free, owing to the mortgage interest deductions and depreciation. Therefore, it might happen that you will not have to pay tax on the cash flow and can wait till there’s capital gain after you sell the property in the future.
Apart from above, another reason for investing in real estate is that population is increasing every year; therefore, there will be constant demand for housing. Though the demand may not be the same all the time, yet you can expect good return on your investment if you know the strategies of profitable real estate investment. Therefore, it is advisable at the initial stage, you take advice from an expert real estate investor regarding how to invest in real estate profitably.