Real estate is far more than just a place to reside, work or conduct business. Real estate can also be potentially lucrative, whether it’s residential, commercial or industrial in nature. Even buying a piece of land offers a chance at income.
Here are some key reasons why you should invest in real estate.
Real estate investment benefits
One of the most notable benefits to real estate investing is cash flow. Owning property and renting it out, whether it’s to residential tenants looking for a place to live or a commercial tenant setting up shop, monthly rent allows for a steady stream of cash. When you earn money through investments, we call that passive income.
Of course, there are risks present. It may be hard to find a specific tenant, or a tenant that wants a place long term. What’s more, the wrong tenant can cause problems, particularly if they are behind on rent.
As a landlord, you’re responsible for maintenance and upkeep, which means it’s important to have a budget in place in order to anticipate all the expenses. However, a proper budget should lead to extra cash at the end of the month that goes directly in your pocket!
Typically, real estate appreciates in value over time. Holding onto a piece of property over the course of years will likely lead you to make money simply doing nothing. Property prices have skyrocketed over the last few years; those that got in at the right time have seen value increase.
That doesn’t mean there aren’t dips and obstacles that may cause value to stagnate or even fall, but those who hold property for some time tend to see value increase; when you combine it with the next benefit, you can stand to make money fairly quickly as well. When you sell a property, or exit an investment in addy’s case, that’s another means of passive income.
This is a topic we’ve touched on before: leverage. Real estate is the only asset class that allows you to borrow money for a variety of purposes. If you want to buy a stock, you need the money up front to purchase it. However, if you’re looking to buy property, banks and other institutions are ready to lend you money to make the purchase and you can pay back the loan over a course of five, 10 or even 25 years.
Once acquired, you’re essentially wielding all the income-generating power of that property without having had to pay for it in full upfront. Imagine, for example, putting $25,000 down for a $500,000 piece of property (5%), and you see that property appreciate to $550,000. That increase of $50,000 isn’t measured against the price of the initial property value, but against the $25,000 you paid, which makes for a terrific return.
For savvier (or more risking-taking) investors, owning one property can also facilitate buying a second or third. That real estate that you own can be leveraged for funds to put forth other investments. There is certainly risk involved in stretching yourself too thin, but opportunity abounds.
Real estate diversifies one’s portfolio, particularly if it’s made up of only one asset class like stocks, etc.exclusively of stocks. Real estate, as an asset class, tends to offer steadier growth over a longer period of time and it is more stable than stocks or cryptocurrency. As such, it can protect against volatility present in the market and lead to a higher return based on risk.
As economies grow, however rapidly, demand for real estate tends to grow as well, which can drive up rents. What’s more, there are certain property expenses, such as mortgages, that may be fixed or do not increase at the same rate of inflation. So those who own property are likely better suited to be protected against inflation. At the very least, they are better able to recoup some money lost to high prices of goods and services through rental income and an increase of property value.
Owning property allows you to write off some of the income you make on it. This is mainly due to the fact that property does deteriorate over time,and money needs to be invested back into to maintain it. In another example, the federal government, in an effort to help first-time homebuyers acquire property, has put forth various tax benefits as well.
It’s advised to consult professionals for the various tax breaks that owning property affords.
Lastly, one of the benefits of investing in real estate is the chance to build wealth. Owning a piece of property over a long period of time may increase in value substantially. For many, a home is the most lucrative asset, and something they even pass down through generations.
Investing with addy
addy’s crowdfunding platform allows members to take part in fractional real estate. By crowdfunding commercial real estate property, members can own a piece of real estate and start to enjoy the advantages we’ve listed, such as a chance at passive income and portfolio diversification. On top of that, they’re not on the hook for property maintenance or management. Properties drop regularly, so join to take part in this exciting opportunity.