Even though investing in real estate does imply a certain level of responsibility and taking action, it is still a worthwhile investment. There are many benefits of investing in different types of real estate properties, due to which people decide to go for it. Before embarking on the profitable journey of investing in real estate, you should be well familiar with your obligations, not just benefits. You can consider investing in REITs, residential and commercial properties, or house flipping.
Buying into a REIT means purchasing a share of properties. On the other hand, when you buy a residential property, you can either live in it or rent it. Also, you can buy commercial real estate and rent it as offices, shop spaces, or even warehouses. House flipping implies buying a property, up-scaling it, and selling it for more money.
Among the top benefits of investing in real estate is additional, passive income. It is a great way to earn money passively. Investing in real estate also brings several tax advantages. It helps build home equity. Moreover, it is also beneficial in terms of appreciation. It can provide us with long-term security and protect us from inflation.
Additional, passive income
The first and one of the most important benefits of investing in real estate is additional, passive income. It is a great way for boosting your monthly income. Not only that, but it is also a steady cash flow. You can generate this passive income in multiple ways. You can achieve that through rent collection, pet rent, and move-in fees. Of course, managing a rental property does imply certain costs and expenses. If done right, they can be easily covered by rental fees. There are some online calculators you can use to analyze each property and see whether it can serve as a sufficient passive income.
Several tax advantages
When you invest in real estate, there are some tax benefits for you. You can deduct several expenses that stem from owning an investment property. These include mortgage interest, property taxes, property management fees, and property insurance. Also, you can deduce the cost of repairs, the costs of ongoing maintenance, and advertising your property to potential renters. For example, if you decide to buy real estate in Strathfield or any other suburb in Sydney that is in need of investment, you will pay less tax on capital gains. Also, if you sell your property for much more than you bought it, the gain won’t be taxed as income. You’ll again end up paying less income.
Home equity
Among the benefits of owning real estate properties is building home equity. In that case, you have the ability to build home equity by paying the mortgage. This home equity that you build increases your net worth. But not only that, you can use it to buy additional properties in the future. It is a great way to expand your real estate portfolio, without having necessarily to take another loan or form of financing.
Appreciation and long-term security
When you have a rental property, it typically appreciates over time. It means that its value slowly increases over time. You can make a profit from it even if you rent it only for a few years and decide to sell it for a higher price than the initial. Owning a rental property also provides long-term security. Local demand for real estate is almost always present, especially when the market is competitive. Taking up the role of a landlord might seem overwhelming and challenging at first, but it becomes natural when you master the basics. You can also make it easier by hiring a property manager or leveraging a management software platform.
Security from inflation
People consider real estate investment to be protected from inflation. This is something you might want to have in mind in these insecure times. When there is a rise in services and goods, there is also an increase in rents. In case of inflation, owning a rental property can provide you with an increasing income every month. Your property appreciates as well. This can secure you financially when the costs are rising.
Diversification in your portfolio
As you are aware, there are plenty of ways to invest your money. Some pose a higher risk, while other lower. At the same time, some bring more profit while some less. With some investments, you can earn money fast, while with some you need to be patient. When compared to other forms of investment, we can say that investing in real estate poses a lower risk. For instance, if you rent your property for 12 months, you can rest assured that you will get a monthly payment. With other forms, it’s not so secure necessarily.
These are just some of the many benefits owning a real estate property brings you.
Jess Cooper is a part-time journalist and blogger based in Sydney, Australia.