Top 10 Reasons Why You Should Invest in Real Estate
I was looking at my blog today and I noticed how in-depth my topics were getting. Nothing wrong there, of course. However, I wanted to go back to basics and remind you why you should invest in real estate in the first place. Knowing that “why” and remembering the reason behind your actions will keep you motivated to push forward and chase new successes. So, let me remind you why you’re here.
#1 Financial Freedom
Imagine never having to go to work again because your passive income streams are enough to cover the expenses of your lifestyle. We call this financial freedom and many people swear by it. However, getting there takes time, effort, and of course, a lot of risk. Real estate investing is one of the safest routes to financial freedom, as it can unlock doors to multiple streams of income.
#2 High Tangible Asset Value
Real estate properties are tangible assets, since they fall into the category of physical things you can invest in. Being a tangible asset, real estate will always have some kind of value, no matter where the market goes in the future. Stocks, on the other hand, are not a tangible asset - meaning your monetary value invested in stocks can easily reach $0 if the market crashes. However, your real estate investment will experience such a drop.
#3 Appreciating Value
The good thing about real estate is that it is appreciating in value all the time and it will continue doing so. Not only will the actual property or building grow in value with the years to come but the land it sits on will increase its value as well. In some cases, the land ends up being even more valuable than the property built on it. That means higher return on investment years from now.
#4 Controllable Value
Another great thing about real estate is that it allows you to control its value and increase it with certain actions. For example, you can always improve and renovate a property to increase its value by adding amenities such as pools, updated kitchens, etc. Whether you choose to rent the property out or sell it for more than you bought it for, you still control how much you want to increase its final value.
#5 Equity
The longer you own a real estate property, the more equity you’re going to have in it. Most simply put, equity is the portion of the home you own completely, as opposed to the portion that the bank owns due to the financing or loan option you chose. In other words, the more you pay off the loan, the more equity you build in the property, meaning you will be able to secure a higher ROI if you were to sell it. You also have a chance to leverage the equity and take out a home equity loan. People usually do this to finance renovations, buy rental properties, or pay for college for their kids.
#6 Higher Return Than Stock Investing
Don’t get me wrong, I’m not against stock trading or investing. In fact, I’m not that familiar with the industry to be able to comment on it in detail. However, what I do know for sure is that real estate offers better returns than the stock market, which is one of the reasons you should consider getting into it. Besides, real estate is a great way to diversify your portfolio on top of practicing other investing strategies as well.
#7 Predictable Cash Flow
Unlike some of the other investment options, real estate actually allows you to predict your cash flow to a certain level, meaning you can plan your investments more precisely. Once you know the potential outcome of each investment, you will be better equipped to look for new deals and find ways to build wealth and pave the way to financial freedom. If you know what the property is renting for or you know how much your renos are going to boost its value, it becomes a lot easier to manage your budget and keep track of your money.
#8 Passive Income
Although real estate investments require a lot of time and knowledge at first, they can be turned into passive income in the long run. For example, if you’re following the BRRRR strategy, once you rent the property out, your work there is almost done, especially if you’re outsourcing the management. That means the property will remain a source of passive income for you, while you go out there and start looking for the next one. Repeat this process a couple times and you will have several great sources of passive income building up your wealth each month.
#9 Tax Benefits
One of the best benefits of investing in real estate are the tax benefits that come along with it. As an owner of an investment property, you get to deduct all sorts of expenses from your taxable income, including current and capital expenditures which I explained in one of my latest blog posts. That means you can actually save money by investing into renovations and improvements of the property. Moreover, you can claim a depreciation non-cash expense on your taxes as well.
#10 It Pays Off On Its Own
Last but not least, don’t forget that income properties basically pay themselves at the end of the day. By using the rental income to pay down the mortgage, you won’t even have to spend your own money to get on top of that debt. That is why rental income is the best way to go if you’re planning on achieving financial freedom a couple of years from now.