Investing in tried and tested assets like real estate is one of the most reliable ways to attain financial freedom and generational wealth. Most of the world’s popular billionaires, including Warren Buffet and Bill Gates, have real estate properties in their investment portfolios. Real estate investment has both long-term and short-term benefits, making it one of the most reliable investments.
In this article, I will share why adding real estate to your portfolio is one of the best investment decisions you will ever make. Let’s get started.
Real estate appreciates at a rate of about 14.5% per year, making it one of the most rewarding investments in the long term. You will most likely sell your property at a higher price a couple of years down the road if you ever feel like getting cash out of it. In addition to this appreciation, real-estate property rental income also increases annually.
If you invest in a rental property, you will be assured of getting monthly or annual income. Most of the time, the demand for real estate properties is usually higher than the supply. If you price your properties right, you will likely have tenants throughout the year to ensure a steady cash flow.
Location and the standard of your real estate properties will hugely affect the periodic income that you will get. To ensure steady cash flow, it is best to invest in real estate properties located in high-demand areas and ensure you meet the quality needs of your target customers.
One of the most underrated benefits of investing in real-estate is the leverage it gives the investor. You can put your real estate property as collateral to get a loan that can be used for other investments in real estate or any other sector of your choice. For instance, a 20% or more down payment on a mortgage gives you full ownership of a new property. The rental income generated from this acquired property can finance the loan.
The need for residential houses and commercial buildings will always be there for as long as we live. This makes real estate one of the most reliable investments for anyone afraid of making losses. Of course, prices can fluctuate due to various dynamics, but the demand for real estate proper will always exist.
Real estate is among the most tested investment that has existed for centuries. Even during challenging economic times, people will always prioritize housing because it is one of their basic needs, along with food and health care.
When you invest in real estate, you will enjoy certain task deductions that include but are not limited to operating and owner expenses, depreciation, capital gains tax deferral, property insurance, the costs of ongoing maintenance, FICA taxes and more. This reduces your overall expenditure as compared to investing in other types of assets that are not in real estate.
When you eventually sell the property, the profits you get won’t be taxed as income. they will instead be taxed as capital gains, whose taxes are usually less than income taxes. These deductions will vary depending on the country and its tax laws. But the good news is that most countries around the world offer some form of tax deductions to their real estate investors.
Once you buy real estate rental property, you will constantly earn from it without having to put in any active effort. Having a passive source of income is everyone’s dream since it gives you more time to do your personal activities or engage in other businesses if you wish to. Of course, there are certain occasions when you might be required to step in to attend to any issues related to your properties.
However, you can hire a property manager to handle such issues if you want your property's income to be entirely passive. It is also safer and relieving to let property managers handle your property since they have more experience in this field. They will likely do a better job while saving you the stress of managing rental properties' day-to-day operations.
When the prices of goods and services rise, the value of rental properties also increases. The annual inflation rate in the US and most countries is usually below 5% during normal economic times. Since real estate properties have an annual appreciation rate of about 14.5%, inflation rates will not have any significant impact on your investment.
Over the years, the appreciation rate of real estate properties has always been higher than inflation. This makes real estate a safe investment even in the most challenging economic times, such as the recession that is currently affecting most economies around the world.
When you choose to invest in real estate, you will have a variety of options to choose from depending on your capital, your lifestyle, and several other factors. You can also play it safe by investing in different types of real estate properties. Some of the common types of real estate properties that you can invest in include; multifamily properties, duplexes, triplexes, and fourplexes, commercial properties, land, vacation properties, office spaces, apartment complexes or buildings, turnkey investment properties, distressed properties and more.
Before deciding which real estate property to invest in, it is always crucial to seek advice from experienced and trusted real estate experts to determine the feasibility of the property you want to inject your money into. You would rather pay the consultation fee to these experts than make a wrong investment choice that could potentially hurt your portfolio in the long run.
You can acquire a real estate property by borrowing 50 to 90%of the money. The annual mortgage payments are usually less than the yearly income you will get from the property. So, you can literally acquire a real estate property that is worth $250,000 if you have $50,000 in cash.
This will work, assuming your property is always full or close to full capacity. You should also do your math before choosing the financer and the exact real estate property to invest in. It would be best to seek expert advice if you aren’t very experienced in real estate investing.
Real estate investment may not earn you the abnormal profits you might achieve with other riskier investments such as stocks. However, real estate investment has been tested and proven to work over time, making it one of the safest investments. The good news is that it doesn’t require having the full amount of the property to acquire it. You can get started if you have around 20% or even 10% of the property’s market value.
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