Real estate is one of those classic investments that’s never going to go away. Believe it or not, there are over 11 million independent landlords in the United States, making real estate one of the most popular investments in the country. Well, it has a low barrier to entry and a lot of perks to offer. If you’re looking to diversify your investment strategy, then let’s talk about some of the key benefits of investing in real estate!
Gold and other precious metals are some of the most time-tested investments people still buy. Many people prefer having a tangible asset for their investment rather than something as volatile or inherently meaningless as stocks or bonds. Stocks can tank at any time, and all you’re left with is a piece of paper.
However, with real estate, you’ll always have the building. Of course, you’ll need to do some market research to find a secure neighborhood, but that’s not a problem. Once you find it, you can continue earning money from it for as long as you want, and you’ll always have the property to resell if you choose.
For example, let’s say you buy a property for $200,000 with a 20-year mortgage. You collect $3,000 in rent total from the two units and spend an average of $1,500 a month on the mortgage, insurance, maintenance, and property taxes.
In that case, after 20 years, you’ve netted $360,000, and you still have the property to resell, likely for a higher price. If you’ve continued to put in small renovations over those 20 years, you may even see a major profit margin. Also, if you choose not to sell, you can now net more income every month without your mortgage payment.
We know it doesn’t always work out like this in practice. However, there’s a lot of room under $360,000. Even if you end up paying for a new roof, new kitchen, and new flooring, you still come out with over $300,000 profit before the resale value.
If you wanted a million-dollar share of a company on the stock market, could you put down $150,000 and suddenly be the CEO? You may be rereading that question because it sounds so silly, but think about it. What other investment gives you near-total control for only 15% to 20% down?
The answer is that there is none. The barrier to entry is very low with real estate, but you will have total control over the asset and decisions made surrounding it. Whatever you think will offer the highest return, you’re free to pursue it, as long as it’s within the law and your mortgage agreement!
Let’s be clear and say that no investment is 100% secure. Otherwise, everybody would be investing.
However, everybody needs somewhere to live, which is why most millionaires agree that real estate is the best investment. This makes real estate uniquely resistant to recessions and other economic periods. If the stock market is too volatile for you, then real estate is a much better solution.
Having control over your investment is great, especially when you understand the different ways to invest in real estate. There’s property flipping, long-term rentals, short-term rentals, and so much more. Depending on your market and goals, you have plenty of options to choose from with any property you buy.
With inflation on everyone’s mind, real estate is one of the best investments you can make to protect yourself. As a landlord, you’re entirely in control of rental prices and policies of the building, so you can easily protect yourself from rising costs over the long run.
There are many tax advantages that come with real estate investments. You’ll find many unique deductions, including depreciation, mortgage interests, management fees, and so much more. All of this adds up to huge savings on your tax bill, which is great if you’re self-employed or earn most of your income through investments.
Also, the steady, predictable revenue stream is easy to plan for when it comes to tax time. You’ll have an idea of the maximum amount you’ll earn in that first year, allowing you to easily prepare for the bill in advance. Just remember to track expenses as you go!
We know that being a landlord comes with a lot of extra work, which is why the investment isn’t for everyone. However, for only a small portion of your rental income, you can have all of the work covered for you. That includes tenant screening, tenant relationships, maintenance, and everything else.
If you want the freedom to travel or retire without headaches, an experienced property manager could help you. From there, you can just sit back and watch the checks come in!
Also, in many cases, property managers can help maximize your profits. Experienced property managers know how to set the right policies, advise, balance budgets, fill vacancies quickly, and set market rates. In many cases, hiring a property manager will offer a direct return on your investment.
Enjoy the Benefits of Investing
Now that you know some of the benefits of investing in real estate, you can see why it’s so popular. If you want to reap some of these rewards, consider real estate investments to diversify your portfolio and earn steady, passive income. Just make sure you have the right help!
Stay up to date with our latest real estate tips, and don’t hesitate to contact us with any questions or for help with your investing strategy!