There are distinct benefits to investing in real estate. Investors may enjoy consistent cash flow, good yields, tax benefits, and diversification with well-chosen assets—and it is possible to use real estate to develop wealth.
Are you considering investing in real estate? So, what makes real estate investing so appealing, particularly in our current market?
1. Appreciation of Value
Real estate values always increase over time. With a good investment, one can turn an enormous profit when it’s time to sell. Rents also tend to increase with time, leading to higher cash flow. It is historically evident the longer you hold onto your real estate, the more money you will make. The housing market always recovers from bubbles and crises that cause home appreciation to slip.
Following even the most uncertain times, prices always return to normal, and appreciation is back on track. In other modes of investment, like the stock market, the risk of loss is omnipresent, but real estate offers increased control over one’s investment. Property being a tangible asset can be leveraged to capitalize on numerous revenue streams while enjoying capital appreciation.
2. Cash Flow
Another significant advantage of real estate investing is the cash flow it produces. Unlike stocks or bonds, which may not pay dividends for years, real estate can generate positive cash flow from day one—if it’s managed correctly.
This is especially true with commercial real estate, where businesses are almost always looking for new space to lease. With a good investment, an investor can see a regular return in the form of rental income. This is one of the most attractive aspects of real estate investing and is a major reason why so many people are drawn to it.
3. Tax Breaks and Deductions
Investing in real estate comes with several tax breaks and deductions that can save investors a lot of money come tax time. For example, mortgage interest and property taxes are both deductible—which can lead to significant savings. In addition, any repairs or improvements made to rental properties can be written off as business expenses. These tax breaks make real estate investing even more attractive and can help investors save a significant amount of money.
4. Tangible Asset
Real estate is a tangible asset, which means it has a physical presence. This is in contrast to stocks or bonds, which are intangible assets. Having a physical asset provides investors with a sense of security—if something goes wrong with the stock market, investors can lose everything overnight. With real estate, however, investors always have the underlying asset to fall back on. This makes real estate investing one of the safest and most secure ways to build wealth.
5. Portfolio Diversification
Real estate investing offers an excellent way to diversify one’s portfolio. By investing in different types of property in different locations, investors can reduce their overall risk while still enjoying the many benefits of real estate investing. This diversification can help protect investors from losses if one particular property or market experiences problems.
Despite all of the advantages of real estate investing, there are some disadvantages. One of the most significant is a shortage of liquidity (or the relative difficulty in converting an asset into cash and cash into an asset). A real estate deal might take months to conclude, as opposed to a stock or bond transaction, which can be finished in seconds. Still, real estate investing offers several advantages that make it an attractive option for investors.
Evergreen Investments is a real estate service provider for property owners and investors with industry-leading investment real estate research and world-class advisory and transaction services. Our team provides unparalleled market knowledge, access to hidden investment off-market opportunities, and real estate-related advisory and property support for a lifetime, not just a transaction.
For more information on how to make money renting property and rental property management services, contact our team today!