Throughout the years, real estate investing has been a popular way to increase income. Even as far back as the Middle Ages, property ownership and selling of property for financial gain has always been one of the primary ways for the wealthy to protect their assets.
Due to rising property values, real estate is a great investment option. However, you need to make sure that you are ready for it. Before you invest in real estate, you need to research the property carefully and you also need to make sure that you have enough cash. You don’t want your intended investment to be a financial burden instead of a way to build your wealth. Once you get it right, though, you will gain an excellent rate of returns and it is one of the best ways to build long-term wealth. With real estate investment, you could earn a steady flow of income to keep you financially secure for the long-haul.
Here are the top reasons why real estate is the best investment option.
1. There is an increase in cash flow.
Many people invest in a rental property or several rental properties because of cash flow. The cash flow provided by rental income is ongoing, stable, and mostly passive. Compared to other investments that need to be cashed in, owning real estate gives you real-time cash. Many investors also invest in a multifamily property, which could further increase cash flow. A multifamily property is a type of housing where there are separate residential units contained in one or several buildings. Multiple units are an advantage because it offers economies of scale. When you think about it, the price per unit is lower on a multifamily property compared to a single-family home.
2. It generates passive income.
Real estate investment generates passive income. You will earn money from your rental properties even while you’re sleeping.
3. Real estate values will always increase over time.
The value of real estate typically goes up over time. Land and building are appreciating assets. Historically, the real estate market has always recovered from past bubbles. Industrial real estate, in particular, is an attractive investment option because values are increasing. This is due to a rise in demand and a compressing cap rate. The bottom line is that the longer you hold on to your real estate investment, the more money you will make.
4. Real estate protects against inflation.
Investing in real estate is an ideal hedge against inflation. In fact, a rise in inflation rates may even be an advantage for real estate investors. This is because the prices in real estate generally keep pace with the inflation rate. Prices of homes and rent typically increase when there is inflation. When economies expand, real estate drives rents higher and also raises capital values. Investors are protected against both the immediate and long-term effects of inflation. Hence, investors welcome inflation with open arms.
5. Real estate provides a high tangible asset value.
Compared to stocks, when you invest in real estate, it is backed up by a physical property. The tangibility of real estate investments helps reduce the principal-agent conflict. Having a tangible asset also means that it can be monetized regardless of the condition of the financial market. You can also leverage this tangible asset to capitalize on a number of possible revenue streams.
6. It enhances the investor’s portfolio.
Investing in real estate can enhance an investor’s portfolio because it lowers volatility through diversification. When your portfolio is diversified, you spread out the risk. As one of the safest tangible assets, real estate mitigates the risk in your portfolio.
7. It provides numerous tax benefits.
Investors enjoy a number of tax exemptions from owning rental property. You can enjoy tax deductions from: insurance, administrative expenses, legal fees, maintenance costs, and more. If investors have long-term investments, they are also entitled to lower tax rates.
8. It is easy to finance.
Real estate is easy to finance because if you borrow money for the acquisition cost, it often has rates that are lower than the return on investment. In short, the investment return can be magnified through financing, which is called positive leverage.