Real estate refers to a piece of land including any structures and buildings set upon it. This includes both commercial and residential properties usually sold through a real estate agent or by the owner of property themselves. It thus relates that real estate investment includes the renting, buying, selling, management of real estate for the purpose of gaining profits. Commonplace real estate investment properties are residential apartments, rental houses and shops etc. These are usually spare houses and shops which people buy to generate ongoing income by renting them. People investing in real estate generally expect profit over their investment, as value of property goes up with time. The financial advisor Terry Sandvold presents us the top reasons to invest in the real estate.
Top Five Reasons to Favor Real Estate Investment
- Unlimited kinds of properties: Residential, commercial, business offices, recreational buildings – the list goes on. You have the choice to select the one you are most familiar with.
- Long-Term benefits: This is the kind of investment which would contribute to your savings at the time of your retirement and you won’t have to worry about making ends meet. It is far safer option than stocks and reaps more profits as compared to savings accounts.
- Tax Advantages: The real estate gives huge tax incentives on everything from rental properties, apartments, vacant land, industrial and commercial buildings, and shopping centers. The tax benefits in the form of deductions include costs associated with mortgage interest, property tax, operating expenses, depreciation, and repairs. Also, when you have a property which generates income, your mortgage payments are tax deductible.
- Diversification: One great benefit of real estate investment is that it adds to your portfolio. Addition of real estate to it can lower its volatility and provides much higher returns each unit of risk.
- Leverage: You can use other people’s money to make real estate investments such that you pay nothing out of your pocket and reap benefits. Basically, you get a mortgage and pay it back over a very long period of time, while reaping benefits of the investment.
There are two paths waiting for you in real estate industry, which include:
Long-Term Investment
If you can’t spend much of your time in the field, go for a long-term investment. Buy a house in a popular region and rent it out. This way you save a significant amount in shape of that house along with a monthly income. In other words, your actual money is protected, while you’re enjoying sizable monthly revenue. Now it depends on you whether you spend the rent or save it up in a bank to buy another house. That being said, there are some negative aspects of long-term investment as well, such as, maintenance and dealing with renters. The house maintenance remains to be your responsibility and the tenants have nothing to do with it. Secondly, dealing with tenants about terms and conditions and payments delivery can be a bit irritating job.
Short-Term Investment
Short-term investment may double your money, but requires much care. The game is simple; buy any property, and sell it with a significant profit margin. However, the execution process is a little tricky ― you got to select attractive properties which can be sold instantly, and on a price greater than what you’ve paid before. Once you get comfortable with the procedure, you will surely make a lot of profit.
All in all, real estate is one investment that has far more advantages than disadvantages. It is reliable, risk is low, provides higher chances of profits and increases in value with time.
