One of the safest, most popular, and potentially lucrative investment options is real estate. Real estate investment has several advantages, such as the potential to create wealth, leverage equity, expand professional and personal networks, and have a positive impact on one’s community. You should weigh the benefits of real estate investment against any potential drawbacks before making a final decision.
Generate Wealth & Build Equity
The power of equity is the first of several benefits of investing in real estate. Owning a home or other piece of property inevitably leads to a rise in its monetary worth. Gaining equity in a home is as simple as paying down the mortgage and seeing it rise in value. Investing in equity, which is an asset that contributes to your net worth, is a simple yet effective approach to build wealth. For instance, from $8.6 trillion in 2011 to $28.7 trillion in 2023, the value of homeownership equity quadrupled, as reported by FRED.
Having equity gives you more leeway to make money and increase your return on investment (ROI). You might earn a tidy profit if you timing the sale of your house well. However, you have the option of taking out a home equity loan and using the equity as leverage to expand your investment portfolio. You may keep living in your house and use the equity to purchase a rental property. This way, you can earn money every month and your profits will be doubled.
Tax breaks on real estate can balance out income and lower your total taxes. Rental income is not subject to self-employment tax. And at the same time, the government lets people get tax breaks for things like insurance, property loss, repairs and maintenance, court fees, and even mortgage interest. When people invest in real estate for a long time, they pay less in taxes. It’s easy to subtract reasonable costs of having, running, and controlling land.
The worth of real estate has been going up steadily for the past 80 years. Even though there have been times when prices went down, the general direction has always been up. Real estate prices are set by supply and demand, just like the prices of other things.
So what is it about real estate that keeps people wanting it so much over the years? One of the main reasons is that everyone needs a place to live. It’s important for people to have safe places to live, work, and shop. Real estate is also a good business because it grows in value over time. When inflation is high, the value of real estate goes up.
One of the best things about dealing in real estate is that you can use leverage to buy a property by spending only a small amount of your own money and borrowing the rest. You can buy good real estate for as little as 15% of the total price if you save up a down payment and get a mortgage to cover the rest of the cost. In other words, you only put a very small amount of your own money into the land, but you still own it. It also makes sure that you don’t invest all of your life savings in real estate and that you have some saved for situations.
You can get credit to buy real estate, which you can’t do with things like stocks, bonds, mutual funds, and commodities. Dealers will lend you up to 80% of your home’s market value, and sometimes even up to 90%. A few years ago, lenders would even give more than the value, giving you 100% leverage and an endless return on your investment.
Others may say that you can borrow money to buy stock, but buying stock on margin is not the same thing. Most of the time, you can only put up 50% of the initial capital. If the value goes down, you may have to pay those funds back with a broker’s margin call.
Property is a physical item that can be used to make money in a number of ways while also increasing in value. Real estate has a high tangible asset value, which means that it will always be worth something. This is different from investments like stocks, which have low or no tangible value.
Real estate is simple to buy, easy to finance, gives you tax breaks, makes your life better, and doesn’t come with any huge financial problems. Therefore, real estate is still one of the best ways to make money today.
Opportunity for hands-on involvement
Real estate investment gives business owners a chance to be involved in the process. You can either take care of the property yourself, hire a property manager, or even get together with other owners to split the work. Being involved in real estate in this way can also help you learn about the market and find good business options.
Investors in real estate can also use the deals to meet other business owners. You can meet with other real estate owners, real estate agents, builders, and property managers, among other people. These relationships can help your business in many ways, like helping you find new customers or even business partners or finding companies that you might want to buy.
Potential to generate passive income
One great thing about investing in real estate is that you might be able to make money without doing anything. This can give business owners more financial security, especially when times are tough. You can also use this passive income to grow your business by adding more workers, buying new technology, or adding more products to your line. For loan options for my businesses, I have also been able to use that idle income as extra money.
The last thing is that investing in real estate can also be used to leave a legacy. When you buy real estate, you not only make more money for yourself, but you also leave a legacy that can be used by future generations. This gift can give your family financial security for many years to come and make you feel proud of what you’ve done. It also builds on the heritage your business is already creating.
No matter how long you’ve been in business or how new you are to it, buying in real estate can give you the safety and extra security you need to grow your business and make money.