4 Reasons Why Real Estate Makes the Best Investment
There are lots of different ways you can invest your money. Stocks, bonds, mutual funds, art, bitcoin, marijuana startup (no, I’m not kidding) – the options are plentiful and obviously very diverse. Real estate, of course, is another one, and it’s one that is commonly used by investors looking for both short and long-term gains. While bitcoin may be a hot commodity today, and the stock market may be up next week, history has proven time and again that investing in real estate is a solid strategy with very real profit potential. Here are 4 reasons why real estate is the best asset for your investment dollars:
- Cash Flow – Cash flow is the money you get off your investment each month, after all expenses are paid. So with an investment property, you take all the income you make off of said property (rent and any other miscellaneous revenue), subtract all the expenses (mortgage, taxes, insurance, repairs, etc.), and what you’re left with is your cash flow. The goal is to net a positive cash flow each month, which means income on a consistent basis – and it’s income you can use for whatever you want, whether it’s making updates and adding value to your existing investment, or using it to purchase more real estate.
- Appreciation – Real estate also offers up long-term gains in the form of appreciation. Let’s say you bought a house in a steady, middle-class neighborhood 10 years ago for $50,000. You’ve kept the property up, the neighborhood has been well-maintained, and now you’re ready to sell. Guess what? Chances are your property is now worth quite a bit more than it was when you bought it. That’s appreciation, and it’s money in your pocket. The trick to getting the most out of the this is to choose your investments wisely, both in terms of location and the quality of the property itself. If you do this and you put in the time, effort, and money to keep your property in good shape, you’ll likely see significant growth in its value over time.
- Tax Benefits – As a real estate investor, you’ll also enjoy a number of tax benefits that will save you thousands. Some of these include: deductions for depreciation and repairs, rental income isn’t subject to FICA tax, no taxes on appreciation, lower tax rate for capital gains, and the option to use a 1031 Exchange to sell one property to acquire another without incurring taxes. See? The IRS isn’t so bad after all!
- Control – Finally, real estate gives you much more control over your investment than other types of assets. With real estate, you can better dictate what happens to your property in terms of value, as well as who lives in it. While you’re not immune to economic fluctuations, demographic shifts, or natural disasters, you’re also not in a position where you have essentially no control, like you are with stocks and bonds. All you can do with that type of asset is buy and sell. With real estate, on the other hand, you can add value through updates, you can increase the rent when it’s justified, and you can make sure your property is occupied by reliable, high-quality tenants.
There are lots of reasons why real estate is the best choice for your investment dollars; these are just 4 of them. Real estate provides a tangible asset that stands a very good chance of making you money now and in the future. Every smart investor knows that this type of asset deserves a place in a well-rounded, high-performing investment portfolio – so be like those guys (and gals) and make sure you’ve got a spot for real estate in yours!