That’s the famous quote that’s attributed to Mark Twain. Even then, he recognized the benefits of investing in real estate.
Land is a scarce commodity. It’s not something that you can create or manufacture. You can place improvements on the land to increase the value, but that’s it. That’s one reason why real estate is a smart investment.
It’s also a great opportunity to build wealth and security at a time when things seem too volatile. Read on to learn about the benefits of real estate investing and how you can get started.
The Top Benefits of Investing in Real Estate
Are you considering investing in real estate? You may be thinking whether or not it’s a good investment. Like all investments, there are some risks involved and you have to do your homework.
These are some of the benefits you should consider before deciding to invest in real estate.
1. Tax Benefits
How would you like to pay less taxes? This is one of the main benefits of investing in real estate.
If you hold on to a property for a long period of time, sell it and make a profit, you’ll pay less in taxes. That’s because you’re taxed as a long-term capital gains rate, which is lower than short-term capital gains.
2. Long-Term vs. Short-Term
Real estate investing isn’t about making money in the short term. People who sell that dream are lying to make a buck.
What real estate investing does offer is a long-term investment play that can pay off in months or years. In the meantime, you can make money from your investment through rental income while the value of the property increases.
3. Passive Income
How would you like to make money for little work? That’s the dream that so many people have. They want to live off of income without having to show up at an office to do work.
You can do that with real estate investing. You have to keep the property maintained, but you can collect a monthly income from renters.
4. Real Estate Investing is Predictable
It’s hard to tell what the stock market will do from day to day. With so much volatility, you can make money and lose it all within an hour.
Real estate investing works much differently. Instead of riding the emotions of investors, real estate investing is much more steady and predictable.
Not only that, real estate tends to react to economic reports much later than the stock market. If economic indicators show that there’s a recession on the way, you have some time to prepare for it.
5. Appreciation in Value
For the most part, real estate will go up in value. This is where your research prior to investing comes into play. Appreciation shifts from city to city, neighborhood to neighborhood. If you invest in the wrong markets, you could see your properties depreciate over time.
Even if the rate of appreciation slows down, you’re still adding to the value of the home just by owning the property. Once you add improvements to the property, you’ll add more value to the home.
6. Portfolio Diversification
Real estate investing is a great option if you already have investments in stocks and mutual funds. This enables you to diversify your portfolio.
A diversified portfolio will help you weather any storms that the stock market has. If your stocks take a hit, you still have the appreciation and cash flow from your real estate investments.
7. Liquidity of Real Estate
You might be doing a double-take on this one. Real estate isn’t known for being a liquid asset, meaning that you can sell it and convert it into cash quickly.
Usually, the real estate sales process takes so long that if you need to sell, be prepared to wait. There are ways to sell your commercial properties for cash quickly. You should read this useful article to find out more.
Other options for liquidity in real estate investing include investing directly in real estate development companies or REITs. Here, you can buy stocks of these companies, which you can turn around for a short-term gain.
8. Upgrade Properties
There are many tax advantages when you invest in real estate. One of those advantages lies in your ability to upgrade real estate properties without the tax hit.
For example, if you have a multi-family dwelling that you want to sell and then buy a larger property, you can do that through a 1031 exchange.
That allows you to sell your property and roll the profits into the larger property. That will keep you from having to pay capital gains taxes on the sale of the property.
9. Leverage Other People’s Money
Robert Kiyosaki raved about real estate investing in his series of books and talks. What he noted is that it didn’t take much to get started investing in real estate.
You can start by taking out a mortgage on a multi-family unit and live in one of the units. You can then rent out the other units and start to make money in real estate.
The beauty of that transaction is that you’re only putting down a small percentage of your own funds for the down payment. You then leverage the bank’s money to turn it into a profitable transaction for you.
Start Real Estate Investing Today
There are so many benefits of investing in real estate, it doesn’t make sense to wait. You don’t need that much capital to get started. You’re creating long-term security and growth in real estate. It’s a smart way to diversify your portfolio, too.
Would you like to see more great tips about commercial and residential real estate? Check this blog often for the latest real estate articles.