There are many of great reasons to invest in real estate, but is it ideal for you? Here, I try to cover some simple bases that can help you lead in the right investment direction.
Benefiting from real investment requires a lot of time, so only invest in if you are very patient. If you think you are looking to make a quick returns by then you should not invest in real estate. It is a unique investment option because it consists the buying of real physical property, vs buying stock which is a market share of a company’s business.
Purchasing real property requires much more commitment and follow-ups than buying and selling other stock investments. The costs to acquisition and dispose of a real property are high which includes mortgage fees, commissions, appraisals, inspections, filing fees and advertising costs and the amount of time it takes to find, buy, maintain and sell a property.
When you own the property, you will have to maintain it, if it’s on rentals, you will have to maintain tenants, legal rights, property insurance, contractors, the tax, etc. In short, the money and amount of time of investing in real estate are quite high.
With that in mind, investing in real estate can be a rewarding option because of it offers lots of tax breaks. If you willing to not scare of all the extra costs and time mentioned above, and self determined enough, you can look forward to the following:
1. Real estate is more stable than stock shares. Although real estate prices do go down sometimes, they typically go down and up in more controlled level as compared with other investments.
2. Purchasing real estate property uses leverage to multiply your returns. For example, you can buy a $600,000 property with only $60,000. When the property rises 5%, you make $30,000 on your investment of $60,000, which is a 50% return on your money.
3. Having an investment property do offers a lot of tax breaks. The taxes, interest, and insurance are deductible against the rents that it generates from the tenants. And losses can be deducted against personal income to help reduce tax burden. Additionally, personal assets such as computers, phones, software, and other related expenses can also be deducted to make paper profit lower and to reduce taxes.
4. Purchasing a real estate is a great way forward to diversify investments. Having a lot of investments in stocks and bonds, it makes perfect sense to invest in real estate, too.