Real estate is a great way to secure your financial future. It can give you excellent rate of return, significant tax advantages; and if you get a little investment advice, you may be able to leverage your property to acquire capital to build even more wealth over time. To give you a clear picture of what real estate might mean to you, here are five important benefits of real estate:
1. Better ROI than Stock Market, With Less Volatility
Generally, the risk to your real estate investment is reduced over time, so a 30-year mortgage will have less risk the longer you keep the property. As the markets go up, so does the value of your property- and because of this, your equity grows. On the other hand, the risk is always present in the stock market, and there are hundreds of different factors beyond your control that can reduce the value of your investment.
Real estate provides a more stable investment, and a tangible object that can be leveraged to generate various revenue streams, while still gaining value over the years. The land you own will always have value, and your home is protected with homeowner’s insurance; which ensures that your investment remains intact in the event of a fire, burglary, storm, or other threat.
2. Build Equity and Wealth
When you take up a mortgage for a property, this goes right into your equity, increasing your net worth. The more you build this equity, it allows you to borrow more, and increase revenue through other investments. The good news is, real estate gives you capital appreciation while also allowing you to make money through rental income and commercial activity. Rent will also appreciate with time, which further increases value for your investment.
Keep in mind that real estate returns can also vary, based on things like asset class, management, and location. But whatever the case, most people only watch out for the 11% average annual return rate of the S&P 500. The S&P 500 is what people like to call “the market”.
3. Buying Is Smarter Than Renting
A lot of millionaires got their money from investing in real estate. It is a proven way to increase wealth since real estate outperforms most long-term investments anyway. It also isn’t as vulnerable to short-term market fluctuations. A house or a commercial building is a more convincing asset and proof of wealth than many other types of investment; plus, it may give you some tax cuts as well.
The general idea is to buy when most people are selling, and then sit on the property for a while as the value rises. Think about it; instead of paying $5,000 a month for a tiny apartment, get a fixed rate mortgage of $4,000 a month for a house that could be worth a million dollars in the current market. Think of the options if your house doubles in value in just a few years? It might be the decision that finally gets you in the game.
4. Real Estate Offers a Variety of Options
Real estate gives you more options than other types of investment. When working with stocks or bonds, your options are usually limited to “buy” or “sell”, however, with real estate the options are numerous. You can purchase a property for the sake of flipping it, and then rent it instead if the market tanks. Conversely, you can sell a property if the value increases significantly. Other options for real estate investing include refinancing, rehabilitating, rezoning, developing, leasing, and even subdividing. You won’t get this many options with other forms of investment.
Real estate has some amazing tax benefits. For example, you may not be required to pay tax on income generated from investment property, and this applies for individuals as well as married couples. Couples can get as much as $500,000 tax breaks and $250,000 for individuals. The wealthier you become, the lower the rates become, and the investment doesn’t tie up a lot of your money.
5.Real Estate Diversifies Your Investment Portfolio
If you speak to a financial expert on how to invest wisely, the issue of diversification always comes up. When you spread out your investments over different sectors, it tends to reduce the risk of financial collapse, even if the markets turn against you. Real estate can be a comfortable safety net to reduce the risk to your portfolio, and many have become immensely rich just by focusing on renting or selling property. Remember, the value of a house can go down, but not the land. Owning land and property makes your financial future more secure.
Despite all these benefits, we still recommend that you do your research before investing in real estate, at least so that you understand what kind of drawbacks you stand to face. Real estate transactions take long to complete, so it will help to have a good real estate agent or agency to work with. Overall, real estate is simple to understand and provides an asset class that endows you with wealth.