1. Steady Cash Flow

Owning real estate is a way to boost your monthly income. Whether you invest in commercial real estate or residential, you can rent out your space to tenants. You’ll then receive monthly income in the form of rent checks.

2. Great Returns

If the real estate you own increases in value over time, you can sell it for a solid profit. Remember, the market is always changing and appreciation is not guaranteed. You’ll need to invest in the right property and in the proper timing of the market to see those big returns. The key, of course, is to invest in the right properties that will rise in value.

3. Long-Term Security

Real estate is a long-term investment, meaning you can hold it for several years as you wait for it to appreciate in value. At the same time, if you rent out your real estate you can earn monthly income while you wait for your property’s value to rise. The future market value can be a great retirement for investors to cash out when they are ready to retire.

4. Tax Advantages

Investing in real estate comes with tax benefits. You can deduct several expenses associated with owning an investment property, including your property taxes, mortgage interest, property management fees, property insurance, the costs of ongoing maintenance, the cost of repairs and the money you pay to market your property to potential renters. If you sell your property for more than you paid for it, the gain you realized won’t be taxed as income. Instead, it will be taxed as capital gains, which typically come with lower tax rates than does income.

5. Diversification

Adding real estate to your investments boosts your diversification, which can protect you in times of economic turmoil. If certain stocks are suffering because of an economic downturn, the investment properties in your portfolio might still be increasing in value- which would help protect you from the losses your other investments are taking.

6. Passive Income

Investment properties bring much-desired passive income, that which you don’t have to work for every day. Say you charge rent on a single-family or multifamily property, the rent checks that come in each month. This is the best example of passive income and the most common for most investors.

7. Ability To Leverage Funds

When investing in real estate you probably can’t afford to buy properties in full. After all, that single-family home you plan to rent might cost $200,000 or more. That’s where leverage comes in. Leverage in real estate means you’re using other people’s money to purchase properties. In this case, you’ll take out loans from banks, mortgage lenders or credit unions and pay them back over time. This allows you to add to your real estate holdings without spending the full amount of money you’d need to buy them on your own. The loan allows you to leverage the debt to invest in more than one property with the cash you have available.

8. Protection Against Inflation

Real estate investments are considered protection against inflation. When the prices of goods and services are rising, home values and rents typically increase, too. Investment properties, then, can provide you with rising monthly income and appreciation to help protect you financially when the costs of everything else is going up, too.

9. Fulfillment and Control

Owning investment properties comes with other benefits that aren’t financial. When you own investment real estate, you are your own boss, which is fulfilling to many investors. You can also make a difference in your community, providing homes for renters or bringing businesses to commercial properties that will provide much-needed services to their communities.

The Challenges Of Investing In Real Estate

While investing in real estate brings the potential for a large payday, it also comes with some challenges and risks.

Liquidity

Real estate is not a liquid investment. Once you invest your money in a single-family home, apartment or commercial property, you’ll have to sell that property – or the portion of it that you own – to get your money. Other investments, such as stocks and bonds, are far more liquid. It’s easy to sell stocks to get access to your money.

Starting Capital

You’ll also need more money to get started in real estate investing. Homes and commercial properties aren’t cheap. You might need to apply for mortgage loans to purchase these properties. Investing in mutual funds, CDs and stocks typically requires far less starting capital.

Time 

The profits usually don’t come quickly with real estate investments. Yes, you might charge rent to commercial or residential tenants. But often these payments only cover the cost of your mortgage payments or the other costs associated with maintaining an investment property. The big profits come when you sell the property for more than what you paid for it. To hit that goal, though, you usually must wait several years for your properties to increase in value.

Location

Location is key when investing in real estate. Your property probably won’t increase in value if it isn’t located in a community where real estate prices are on the rise. This means you’ll have to do plenty of research to find the right investment property in the right location.

Now that you know the ups and downs of real estate investing, are you ready to buy your first investment property? Investing in commercial properties, multifamily buildings or single-family homes can bring big returns if you do the necessary research.

Wondering if you should buy a house, wondering how to buy a house or you are ready to apply and buy, give Amanda a call to discuss investing in real estate to  boost your income and build wealth.