10 Reasons to Invest in Real Estate
September 2, 2022
Investing in real estate is a proven method of building personal wealth. Of the world’s millionaires, more than 90% of them have real estate somewhere in their investment portfolios. Whether you’re an established real estate investor or you’re new to the world of real estate investing, it’s important that you have a method and a purpose for what you’re doing with your money. While we aren't financial advisors, as property managers, we believe real estate investment is crucial.
There will be people who need somewhere to live, shop, operate businesses, and more. One of the smartest things you can do as an investor is to work with a real estate brokerage that can set you on the path to success. Why invest in real estate? Continue reading to find out more about why you should invest in real estate.
Steady Cash Flow
Home investing is one of the most established ways to generate income known to humanity. While other areas of investing can prove lucrative, there are also times when you can lose money. For instance, investing in the stock market can lead to fluctuating returns. That’s not usually the case with real estate investing. Instead, you can usually forecast the type of return that you can expect from your real estate investment for years to come.
All investors have one goal: to make money. If you’re wondering why is real estate a good investment, the answer is found in the great returns that successful properties can generate. Investors who focus solely on the stock market may notice marginal returns, but those returns typically pale in comparison to those of successful real estate investors over a long period of time. A single property can generate thousands of dollars or more every year. As an investor whose primary goal is to make money, real estate investing is an obvious choice to diversify your income.
Long Term Security
One of the most appealing aspects of investing in real estate is found in the long-term security it provides. Other investment areas fluctuate based on current market trends. Unfortunately, those trends can change with little to no notice. That’s simply not the case with real estate. People will always need homes, businesses will need places to operate, and medical facilities will always need somewhere to work. That means that a piece of real estate that you invest in today can generate income for you and your family for generations to come.
In the world of real estate investing, nothing matters more than following the tax laws. Failure to do so can result in trouble with the IRS, which is not what you want. So, what are the tax benefits of investing in real estate? There are more of them than we have the time to discuss here! However, some of them include the ability to write off capital gains through a 1031 exchange and the option to write off expenses for improvements on a property, or deduct interest paid on the mortgage of an investment property. You should work with a financial or tax professional to make sure that you’re operating legally, but there are plenty of tax benefits when investing in real estate.
If you’re not familiar with some investment terms, you may be asking yourself, “What is diversification in investing?” To have a diverse portfolio means that you have investments in different classes. If you are playing the stock market, you wouldn’t want to sink all your money into tech companies. Doing so would mean that a crash in the tech industry could ruin you financially. Real estate is a diverse class, so you can invest in multiple fields of these high-yield assets. This leads to better protection against fickle market trends.
If you’ve ever gone out and worked 40 or more hours a week, you probably already know about how great passive real estate investing can be. When you have residential real estate spaces in your portfolio and you work with a reliable property management company, you don’t have to do much of anything other than collect your monthly checks.
Instead of going out and working for your money, you send your money out to work for you. It’s also worth noting that the ability to earn passive income means that you aren’t limited by age or any of the other factors that can keep someone from actively earning their money.
In the world of investing, “leveraging” means that you use debt to fund an investment. While some financial experts preach that debt is always a bad thing, that’s simply not the case. In traditional investment classes, you may be forced to use the cash that you have on hand to invest.
Real estate investing allows people to borrow money from lenders to fund those investments. If you’re wondering how to leverage real estate, you simply get approved for a mortgage or another loan and use that money to purchase a property. This allows you to keep more of your cash on hand for future investments.
Protection Against Inflation
Right now, inflation is one of the hottest topics in our society. As inflation rates continue to soar, you’ve probably noticed an increase in prices at gas pumps, the grocery store, and everywhere else that you do business. Successful real estate investors aren’t prone to changes in inflation percentages, because real estate is a much more stable asset class.
Obviously, there are some market factors that impact real estate, but when considering inflation, real estate investing is one of the safest options out there. This is especially true if you rent space that you own to tenants instead of fixing and flipping properties for sale. Is real estate a good hedge against inflation? Absolutely, it is!
What are tangible assets? The term “tangible asset” refers to an asset that can be physically seen or touched. Investing in cryptocurrency, the stock market, mutual funds, or other investment types, while viable, simply does not provide a tangible asset the way that real estate does.
When you purchase a piece of property to use as an income generator, you can hold onto that tangible asset for as long as you’d like. The importance of having tangible assets cannot be overstated. Tangible assets can be liquidated quickly if you ever experience financial hardships. They can also be used if you approach a lender about leveraging funds for future investments.
Retirement Savings Plans
One of the most common reasons that people invest in real estate is for their retirement accounts. Investing in real estate for retirement is a great way to make sure that you have the money that you need to live on when your working days are behind you. Moreover, real estate investing ensures that you can continue generating passive income long after your working days are over.
While there is certainly nothing wrong with employee-sponsored retirement accounts, IRAs, or other legitimate retirement accounts, real estate is a great option for people who don’t want to face financial uncertainty in their golden years. So if you are asking yourself, is real estate a good investment for retirement, you have your answer.
We are not financial experts and this is our opinion on the subject. You should consult with a financial advisor and do your own research before making any investment decisions.
All investment comes with risk, and if you think that real estate investing is the right choice for you, contact Keyrenter Houston for more information. The team of real estate professionals at Keyrenter Houston can help set you up for success.