The benefits of investing in real estate include passive income, stable cash flow, tax advantages, diversification, and leverage. In this article, we explore the benefits of investing and common strategies for increasing positive outcomes.
BENEFITS OF REAL ESTATE INVESTING
As with all articles on this site, this perspective is only meant to be educational in nature and should not be taken as investment advice or guarantee. Please always discuss investment opportunities with a financial advisor to make the most reasonable and effective decisions for your specific situation.
RELATIVELY REDUCED RISK
While investing in apartments, commercial buildings, and single family homes can bring extra income and big paydays, they can also come with a risk. The goal is to invest in properties that will increase in value over time. One benefit of real estate investing is that it is secured by the asset itself–the building. It can therefore be a relatively smaller risk of seeing your investment lose value and if so, save for natural disasters or decrepit property conditions, reduced value may last only for a short period of time.
STEADY CASH FLOW
Investing in real estate is one way some people choose to increase their monthly income. Whether residential or commercial, real estate investments can often mean the opportunity to lease property to tenants. This means as long as the rental economy is a positive one, there is the possibility of receiving monthly income for years to come.
RETURN ON INVESTMENT
If the real estate you own increases in value over time, you can sell it for a profit. The real estate market is often considered to be a relatively safer investment as in many cases you can either make a return on investment or at least be able to have the value remain relatively steady over time.
Real estate is a long-term investment, meaning you can hold onto it for several years and wait for it to appreciate. In the meantime, you can rent it out and earn a monthly income while you wait for the property to rise in value.
Investing in real estate comes with tax benefits. You can deduct several expenses associated with owning an investment property, such as property taxes, mortgage interest, property management fees, property insurance, the costs of ongoing maintenance, the cost of repairs, and the money you pay to market your property to potential renters.
Adding real estate to your investments portfolio will boost your diversification, which can often provide added protection you in times of economic turmoil.
WHAT ARE THE MAIN TYPES OF REAL ESTATE INVESTING?
There are many options when it comes to investing in real estate. Purchasing a single-family home comes with renting it out, or fixing it up and selling it for more than what you purchased it for. Renting it out for more than your mortgage means additional cash flow each month for you. Another option for purchasing real estate would be a small strip mall or commercial building. Collecting monthly rent from renting out small business fronts is another way to make great additional money. Renting out apartment buildings with dozens of units, and collecting a steady stream of rent checks from your tenants each month is another great way to make an income. Finding a great agent (or becoming one yourself) and doing your research on your own to find a good neighborhood that is up and coming.
Residential properties are a good start when investing in property. They are the “easiest” to work with if you’re just starting off. You can either live it in whole creating equity, fix it up to sell, or rent it out to potential renters. One of the biggest risks when it comes to buying real estate is the potential to lose out on making a profit. So you can lower these odds of a bad investment by researching neighborhoods. Seeing which home is likely to rise in profit, doing your research on the neighborhood means seeing what homes are sold for. Gather comparables in your neighborhood to see what you also need to add to your home if you want to sell it for even more. You should also work with real estate agents and other professionals who can show historic appreciation numbers for the communities you are targeting. Being mindful of the location is key. A home on a busy street might be more affordable but may appreciate quickly. one location as one on a quiet street. Always make sure you do your due diligence before jumping into real estate.
You can earn money by investing in commercial properties much the same way you can by investing in residential. The first step is doing your research and then purchasing the property, charging rent, or fixing it up, or waiting for the market to rise in price and turning it around to sell for more than what you paid. You can also purchase a warehouse and charge rent to manufacturing companies or retailers who need to store their products.
Flipping houses is another great way to make money more quickly. Purchasing a home for a lower price and turning around to renovate it and then sell it fast for a profit. You will want to purchase a home for the lowest possible price if you want to make a profit when selling. If you’re handy enough to handle renovations on your own, your chances of making more money are high. Although it does take a lot of time renovating you may want to look into hiring a contractor. Researching good contractors is extremely important if you want a job done correctly and on time. Setting a timeline for when you want renovations done and it is listed on the market is important as well so you make sure things are completed in a timely manner.
Buying real estate is often considered to be a relatively safe investment. However, there is much research and consideration that should take place before making this investment. Taking the time to sit down and talk with or listen on a podcast to some of the most successful real estate entrepreneurs will help lead you in the right direction when it comes to investing and how to do it correctly. Take your time to do your research to invest properly so you can make a return is a great investment in yourself.