Real estate can be a good investment depending on the place and time. For example, if you bought a home in a budding market for say $100,000 back in 1995 when it was an okay place, today, in 2017, it might be worth significantly more if the area has improved to the point where more people want to live there than before. Ideally, investing in real estate is profitable when you find an “up-and-coming” area where prices are relatively low. Then, over time, as the area becomes popular and gentrifies, you can sell the place for more money than you bought it. Meanwhile, if you choose to rent the place out, rents get higher year after year, bringing you a nice income. A lot of investors do well renting out rental properties.
Financial Incentives for Investing in Real Estate
With real estate investing, especially concerning rental properties, there are several financial perks. For instance, depreciation and mortgage interest deductions (when you leverage your capital) often leads to tax-free cash flow. If you own rental properties and have a certain classification and income level, enjoy tax write-offs against your other income. Personal expenses can be converted to business deductions. Smart investors count travel expenses and payments to family members overseeing the property as deductions. Some even use their rental real estate as a way to save for retirement– and it’s always an option to move into that property at retirement if they so choose.
One of the main reasons investors like real estate as an investment vehicle is because it tends to not only provide a positive cash stream, but it also yields higher profits than typical stock dividends. Stocks can go up or down, whereas land and structures are physical assets with meaningful value for the long haul. Furthermore, once a person starts collecting rental properties in their portfolio, they can place debt on the asset in order to buy more assets with less money. This, in turn, multiplies asset value. As loans are paid down, the investor becomes richer and richer.
Finally, inflation is going to happen, and real estate investment is seen as a hedge against inflation. As inflation occurs, real estate prices rise.
Real estate investment is a good investment overall.
If you would like to learn more about financing private real estate investments, contact Mortgage Man today.