Why Real Estate Is a Good Investment

Nowadays when someone wants to build equity and wealth there are many options to choose from. From stocks and bonds to real estate there can be several decisions to make on what makes most sense to invest your money in. However, a lot of people build wealth using a basic asset they own such as owning an additional property. Let’s examine why real estate is a good investment and how it can build your wealth.

Cash flow

When you invest in real estate you can generate steady cash flow if you are collecting money by renting the property out. To calculate this, add up your gross rent and then subtract your expenses including mortgage payments, taxes, insurance and maintenance costs.

Great returns

A long term real estate investment can have some pleasing returns. Appreciation over time has historically earned many people very substantial equity. Always pick the right location of course so your property will always be in high demand.

Long term security

The long term security of real estate can make it a great investment as the years go on. Also, you are not just waiting for your real estate investment to appreciate in value. Instead, you are renting out the property now and earning money every month that you have paying tenants. Win-win!

Tax advantages

One of the best advantages to owning real estate are the tax advantages. Per the IRS there are expenses you can deduct from your taxes that include things like mortgage interest, property taxes, operating expenses, repairs and depreciation.

Leverage funds

Many investors will purchase their first investment property by taking out a Home Equity Line of Credit (HELOC) on their primary residence. Lenders typically allow homeowners to borrow up to 80 percent of their dwelling’s value. So they are using their equity gained rather than using other available financial resources. It’s a real example of having your money work for you.

Inflation protection

Real estate investing also provides some great protection against inflation. Inflation raises the price of goods, but it also raises wages. Since wage growth is tied to rental prices, you can increase the rent on your properties once the current leases come to expire/renew every year.

Best of all with real estate investing, you are your own boss and call the shots. While it may come with management responsibilities and the like, you are in control of your own destiny.