Undeniably, when we think about investment options, we want something that will give us good and assured returns at the earliest. Experts will tell you the reasons to Invest in Real Estate as this is one of the best ways to get assured returns.
Looking for the Reasons to Invest in Real Estate?
1. Generation of good cash flow
In real estate, once you are done with the loan payment and other expenses you get net income. This is known as cash flow. To put in simple words, real estate has a very good ability to generate cash flow. As equity build-up increases cash flow generation will also increase.
2. Tax benefits
At the time of paying the tax, you can save money. You get the benefit of tax break and deductions. Years of deduction will help to bring down your taxed income. The depreciation of residential property is 27.5 years and that of commercial property is 39 years. With 1031 exchange you can defer from capital gains.
3. Real estate generates different income options
If you are wondering why should you invest in property then it is a way of generating income. There are different ways by which you can earn money from your property. Firstly, you can rent out the property. As years pass the rent will increase. So, your income also keeps increasing. Secondly, you can start a business that is dependent on the property.
4. Appreciation of property
Property appreciation can help you earn lots of money. As time passes the value of the property will increase. If you sell the property at the right time then you can get a very good profit from the property.
5. Addition to your wealth
In particular, once you are done with the loan payment the property becomes your asset. Most importantly, from this asset, you can earn money. This can be instrumental in buying more property. Thus, real estate is helping you build equity. It is helping you earn more money. In turn, this is increasing your total wealth.
6. Portfolio diversification
We are sure you want to decrease the risk factor of your financial portfolio. You must add real estate to the portfolio. This is because real estate has less association with the returns that one gets from bonds and equities.
7. The leverage factor
You can increase the potential return of investment by using real estate leverage. Most importantly, real estate is a physical asset. Therefore, you can use it as collateral for financing.
8. Get competitive returns
Real estate returns depend on different factors. For example, the location of the property. It also depends on property management, asset class etc. Though there are risk factors you will get competitive returns. Good returns are one of the major reasons why investing in real estate is beneficial.
9. The inflation hedge factor
Real estate is a good inflation hedge. The demand for real estate and GDP growth are related. The property rent becomes higher with the expansion of economies. This will give higher capital values.
The option of Real Estate Investment Trust
These days you have the option to indirectly invest in real estate. This is in the form of a Real Estate Investment Trust. In this case, you do not have to own or manage properties. As compared to other stocks you get higher dividends in REIT’s. You can do trading of publicly listed REIT’s at major stock exchanges.
However, there are few drawbacks of real estate investment. Firstly, it is difficult to convert an asset into cash and vice versa. Secondly, it can take many months to complete the transaction.
But real estate investment has a plethora of benefits. The major benefits we have already listed. Overall, it is a good idea to invest in real estate. But one needs to be cautious in real estate dealings and should be fully aware of the reasons to invest in real estate.
Wrapping up
Ideally, one must route the same through proper channels. Make sure you deal with trustworthy brokers and agents. Most importantly, before you make the investment check details like location, expected returns in the long run.
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