Irrespective of whether you think the real estate market is going up, down, or sideways – real estate remains the only ‘real asset’ you can own. When you invest in other assets such as stocks and precious stones, you’ll only book gains when the value of the stock or precious metal increases in the market. Real estate however offers investors many different ways to book gains no matter what is happening in the general market.
Of course, I know buying or owning real estate is not cheap and it might be ‘cheaper’ to invest in other assets than real estate. CreditLoan.com has some valuable resources on how you can get loans and mortgages to finance your real estate investment. Now, let’s get down to the business of providing you with insights on why you should invest in real estate.
1. Traditional buy low
You make instant gains on real estate when you follow the traditional method of buying low. You buy low when your purchase price for a property is lower than the market value of the property. You can buy low if you have awesome negotiating skills, if the seller wants to make a quick sale, or if the property is in foreclosure.
2. Traditional sell high
You can book bigger gains when you sell a property at a higher price than its actual market value or the value of other properties in the neighborhood. Home improvements to increase the curb appeal such as a fresh coat of paint and a new patio could increase your odds of selling high. More so, if you’ve bought a property when it was cheap, you can always sell high and pocket the difference.
3. Rental Income
If you buy a second home or rental property, you can always book gains from the rental income that you get from the property. In some instances, the payments from the tenants might be enough to cover the down payment, improvements, and subsequent mortgage payments. The best part is that you get the rental income in addition to the natural appreciation in the value of the property.
4. Multiple rental income
You can buy a single property and transform it into a source for multiple streams of income by renting it out in smaller units to multiple tenants. For instance, if you buy a single family home with three bedrooms, you can rent out each of the rooms instead of renting out the whole house to a single owner depending on the legislation in your area. You can also find smaller rents through rental platforms.
5. Increasing equity
Real estate provides you with an opportunity to use other people’s money to increase your equity in an investment. For instance, if you bought a property with a 25% down payment and you rent out the property, you can apply the rents from your tenants towards the mortgage payments. If after one year, your equity in the property has increased to 35%, you have effectively used other people’s money to increase your stake in the investment.
6. Tax breaks on income
Real estate provides you with an opportunity to book tax deductions on the cost of home improvements; hence, you get to keep a larger part of your rental income. The best part is that the home improvements will increase the value of the property. In some countries, you can also get tax breaks on the interest payments you pay your mortgage. Hence, real estate provides investors with a bigger opportunity for tax-free profits.