Making any investment can be a little nerve-racking. You are putting your hard earned money into another’s hands, and hoping for the best. Sure, there are things you can do to hedge your bets, but still, you’re at the mercy of the market, and your investment could be profitable, or it could fail miserably.
Even though real estate investments can be just as unstable as other investment types, it is still a popular investment choice for those looking for a way to grow their assets without messing with the stock market. While many people feel nervous about the lending circumstances that led to the market crash in 2008, there are still great reasons to invest in real estate. Here are three big ones.
Money, Money, Money
Obviously, this is the biggest reason to make any investment, right? Well, in real estate, the money comes in a little differently. For example, if you were to buy a property which you then rented out, you would have a monthly influx of cash from the rental payments, as well as the potential long-term increase that would come from the appreciation of the property. If appreciation works in your favor, you may be able to build substantial equity in the property, which could lead to payout should you ever choose to sell.
Alternatively, you might choose to purchase a “fixer-upper” home for a low price, renovate it, and sell it quickly at a higher price—otherwise known as “flipping.” If you have the right connections to help you get your repairs done quickly and affordably, this could be a great way to make cash quickly.
More Control, More Freedom
Unless you want to get very technical in your stock market knowledge, chances are that any stock investments you make will be managed by someone else. This requires you to give up control over your investment. Alternatively, with real estate, you can still be in close control over your investment decisions and purchases. Of course, that doesn’t mean you can’t get help (i.e. from a property management company), because you definitely can. But even then, you are more in direct control over your investments than you might be in you invested in something else.
Additionally, successful investments can bring you financial freedom. Many people dream of being able to break free of the 9-5 office job, and smart real estate investments could help you do just that. You also have some measure of freedom when it comes to what kinds of real estate you invest in; that is, you can try a couple things until you find just the right option for you.
Real estate creates many scenarios that work in your favor when it comes to taxes. Depreciation, for example, which basically happens automatically based on aging properties and fixtures, can result in a net loss on the property for the year, which creates a tax benefit. Also, if you plan on purchasing multiple properties, doing a 1031 exchange allows you to use the cash you gain from the sale of one property towards the down payment on another property, without having the money be taxed as income. There are certain guidelines that must be followed in order to use this benefit, but it can really come in handy when trying to grow your investments.
These are just a couple specific examples, but you may have more benefits coming to you if you pay for mortgage insurance, or if you use the residence as your primary residence for a specified period of time. These benefits should all be discussed in detail with a tax professional, but in the end, it adds up to real estate being an investment strategy that lets you grow your assets, tax-deferred.
There’s no such thing as a sure thing when it comes to investments, but if you’re smart about it, investing in real estate could end up being very profitable for you. If you’re considering real estate investment, or you’d like more help managing your investment properties, contact Real Property Management online, or give us a call at 480-719-1243. We’d love to help you make the most of your investment!