There are many ways of earning money through investment, stocks and real estate being two of the most popular ways. While investment in shares comes with heavy risk, real estate is a safer option. People have been investing in property for years and reaping the benefits. Though the rules of real estate investment are unlike the stock market, it can help you earn a lot if done wisely. Even if you are a successful entrepreneur going sturdy with your primary business ventures, you should probably consider rental real estate as a crucial part of your portfolio. The following article discusses about why you should invest your money in real estate.
1. Get more leverage – Real estate is among the few investment tools where using a financial institute’s money is very easy. The have the power to make a down payment, optimize your capital, and ultimately maximize your overall return on investment.
2. Grow, tax-free – Purchasing rental property on the basis of speculation of its future value can be a risky tactic as cash flow is involved. But appreciation in the long run is more realistic and you should be contemplating a tax-deferred plan. You can even consider charitable trust, an installment sale or a 1031 exchange to further decrease your tax liability.
3. Tax-free cash flow – You should be aware that due to mortgage interest deductions (if you optimize your capital) and depreciation, your cash flow becomes tax-free. A majority of the time, the investor will not pay taxes on his or her cash flow and should wait for capital gains that can come from the sale of the asset in the future.
4. Tax write-offs against other earnings – Based on your categorization as a Real Estate Professional or an Active Investor and your income slab, there is a bright chance that other than your rental property generating tax-free cash flow, it will also create an many tax deductions that can be used against your other income. Make sure you discuss this with your tax professional or advisor before making an investment to keep your expectations realistic.
5. More tax deduction strategies – Rental real estate investment provides the investors with yet another option to convert personal expenses into possibly viable business deductions. Remember that rental property and related activities are a part of business, which means that the travel expenses to make payments to relatives who look after your real estate or a trip to simply check on your properties can be deductible and can boost your tax benefits when talking about cash flow and the property’s future sale.
6. It becomes a forced retirement plan – It is an incredible investment option for those who can’t save. Some people may lack the discipline to make regular deposits into retirement or pension plans. Thus, acquiring a rental property is a major commitment that will compel you to stash away money for the future. You will see how it helps you in the long haul and shall be grateful if you don’t sell it. You can generate future cash flow and huge wealth from it later.
Making profits in real estate sector may not be easier than in the stock market, but the less volatility and high appreciation are major factors why you should invest in it, even when it demands heavy research, patience and sometimes luck. Real estate does not promise an overnight “rags to riches”, but you get a security for yourself and your family. Real estate is a long-term investment and making it a part of your diverse portfolio will certainly produce high returns.
Devika Arora has been writing resourceful articles for the avid readers who wish to learn more about real estate in the global context. The above article by Devika discusses about real estate investment and its benefits. Ample research has gone into presenting the reasons why real estate is a profitable investment.