If you’re thinking about investing in real estate, you are about to start the journey of a lifetime and you’ll only wish you did it sooner. Even with no experience , real estate makes for a great investment. Here’s our top reasons for saying that.
You only need a fraction of the actual value of the property to purchase it
There aren’t too many other investments that allow you to invest in assets worth much more than you have to invest. For example, if you have $10,000 to invest in the stock market, you can usually buy just $10,000 worth of stock.
With real estate, you can put down a fraction of the home’s cost and invest in it. For example, if you find a home for sale for $100,000, you could put down $10,000 up front and get a loan for the remaining amount with no issues , as long as you have good credit and a stable income. No other investment option has this opportunity. That means you invest just 10% of the property’s value and own it. Then as years go by & you pay the mortgage, you’ll hold more of the investment, increasing your rate of return not only by paying the mortgage down but also with the natural appreciation of real estate. Every year that you own the property, it builds more & more value.
You can build up more value in the property
Unlike other investments, you can actually build more value than when you originally purchased it with real estate.
Firstly, real estate value automatically increases by 3–5% per year as long as you maintain the property and keep it in good condition. However, with real estate you can do renovations and continually build more value to your property. Of course not all renovations will build value so you’ll have to do some research and make sure you’re doing the best possible things you can to build more value. Simple things like, remodeling the bathroom, adding granite counter tops in the kitchen, buying new modern appliances. Replacing the old floors with nice quality hard wood floors. Something as simple as replacing the kitchen cabinets can bring back as much as 200% return on your investment. Of course this isn’t guaranteed but it absolutely is possible and even probable. Make sure to use a licensed contractor to do the work on your home, that way if anything goes wrong they will have insurance to cover it. The great thing about remodeling homes to build value is that you have so many different options, you can do simple indoor renovations, or if you have the space you can build an elaborate porch with a built in hot tub or pool. The more work & money you invest, the more value your home will build.
Like any business owner, real estate investors can take advantage of many tax write-offs. But, while it is an investment, when you own a home and rent it out, you run a business, you are the landlord.
As the business owner, you can often write off the following expenses:
- The mortgage interest paid on the loan
- Origination points paid on the loan
- Maintenance expenses
- Depreciation (spread out over 27.5 years)
- Real estate taxes, homeowner’s insurance, and HOA dues
Always talk to your tax advisor before assuming you can write expenses off, but know that investing in real estate is a benefit. When you invest in stocks or bonds, you can only write off any capital losses if you sell the asset for less than you paid for it. With real estate you have a lot more options than anything else.
Constant Cash Flow
If you buy and hold real estate, you can earn monthly cash flow renting it out. Either as one house or separate apartments within the same property. This increases the profits since you aren’t relying only on the appreciation but the monthly rental income as well.
It may seem overwhelming to buy investment real estate and find quality tenants and manage the property, but there are many available resources to help you.
There Are Many Ways to Invest in Real Estate
If buying real estate and renting it out is too stressful for you, there are many other ways to invest in real estate.
- Buy an undervalued property, fix it up and flip it (This is an amazing option and highly profitable)
- Be a wholesaler working as the middle man between motivated sellers and a network of buyers.
- Use house hacking, which means you buy a 1–4 unit property, live in one unit, and rent out the others using the rental cash flow to cover your mortgage.
- Invest in a Real Estate Investment Trust
Real estate builds generational wealth
What comes after life? That depends completely on what your beliefs are but generally no one knows for sure. What we do know, when we die, our real estate will be passed down to our remaining family. The value of the property doesn’t go away, it’s simply passed down. It could be a home for your kids, or even your grandkids. Buying property isn’t an easy process, it’s a huge achievement so it’s only fair that all that hard work you put in to build up that property value can be passed along to keep the property/value in your family.
Nothing is guaranteed
Of course, as with any investing, nothing is guaranteed. However with some hard work and common sense, you’ll definitely be able to make plenty of money by investing with real estate. There’s a high probability that investing in real estate will change your life. You’ll start and never look back. What’s better than building a comfortable life for yourself and generational wealth for your family?