Reasons to invest in real estate

While investing in real estate does come with potential pitfalls and does require research, it can also bring plenty of cash to your bank account. Here are some of the most important reasons to invest in real estate.

Steady cash flow

Owning real estate is a way to boost your monthly income. Whether you invest in commercial real estate or residential, you can rent out your space to tenants. You’ll then receive monthly income in the form of rent checks. Just be careful: You’ll need to research the payment histories of your tenants if you want to reduce the chance that these tenants will one day stop paying their rent.

Great returns

If the real estate you own increases in value over time, you can sell it for a solid profit. Remember, though: Appreciation isn’t guaranteed. You’ll need to invest in the right property to see those big returns.

Long-Term security

Real estate is a long-term investment, meaning you can hold it for several years as you wait for it to appreciate. At the same time, if you rent out your real estate you can earn monthly income while you wait for your property’s value to rise.

Tax advantages

Investing in real estate comes with tax benefits. You can deduct several expenses associated with owning an investment property, including your property taxes, mortgage interest, property management fees, property insurance, the costs of ongoing maintenance, the cost of repairs and the money you pay to market your property to potential renters. If you sell your property for more than you paid for it, the gain you realized won’t be taxed as income. Instead, it will be taxed as capital gains, which typically come with lower tax rates than does income. If you invest in opportunity zones – neighborhoods that are in need of investment – you’ll pay even less in capital gains.

Diversification

Adding real estate to your investments boosts your diversification, which can protect you in times of economic turmoil. Say certain stocks are suffering because of an economic downturn. The investment properties in your portfolio might still be increasing in value, protecting you from the losses your other investments are taking.

Passive income

Investment properties bring much-desired passive income, that which you don’t have to work for every day. Say you charge rent on a single-family or multifamily property. The rent checks that come in each month are an example of passive income.

Chance to build capital

The big goal of real estate investing is to increase your cash, otherwise known as building capital. When you sell a property that has risen in value, you’ll boost your capital. The key, of course, is to invest in the right properties that will rise in value.

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