Benefits of Real Estate Investing

Benefits of Real Estate Investing

Did you know that most of today’s millionaires and billionaires have large, healthy real estate portfolios? In fact, many of these individuals became wealthy because of their real estate investment strategies. These are a few benefits of these investments that you should know about.

Regular Income

When you invest in real estate, you are purchasing an asset that others need. Therefore, you are likely to receive a regular income when you lease these properties. As your real estate portfolio grows, you will experience greater income and reduce your risk because if one of your properties loses a tenant, you still have others that are leased. Therefore, you should receive a regular revenue stream or cash flow on your investments.

Tax Deductions

You can reduce your tax burden by purchasing real estate. For example, you can deduct almost every expense related to your properties, from renovations to utilities and insurance. In addition, you can deduct depreciation, mortgage interest and property taxes.

However, don’t forget to plan for your tax payments. For example, if you sell real estate for more than its purchase price, you will owe capital gains taxes. Also, your property taxes are due yearly and often increase.

Reduced Risk

Many stock investments have a significantly higher risk than real estate investments. However, the returns on your property investments will tend to reflect this reduced risk. Despite the reduced volatility of the real estate market compared to the stock market, these investments do have inherent risks despite their typically steady incline. Do your research and choose the right properties to invest in to reduce your risk further.

Increased Equity

Most real estate accrues value over time. As your property value increases, your equity increases, giving you opportunities to leverage this equity into additional investments. In addition, you could sell your real estate at a profit in the future.

Potential Ancillary Income

Because you own the property, you can typically do what you want with it. This means that you can set up ways to increase your income. For example, you could install laundry facilities in your apartment buildings, add vending machines to your commercial properties or install other miniature businesses at your properties. Your customers either live in or frequently visit the area where these assets are housed, so your audience is somewhat captive.

Whether you are a seasoned investor or you are searching for your first real estate investment, consider these and other benefits of these expenditures.