Investing in real estate comes with both benefits and risks. Generally, investing in real estate means you are investing in something other than your primary home and can be either residential or commercial property. Here we’ll take a look at some of the benefits of this type of investment.
It Helps You Diversify Your Investment Portfolio
Stocks and bonds can fluctuate fairly dramatically both short and long term. Long term real estate investment properties generally appreciate over time and can be sold for a profit down the road.
Provide A Steady Stream Of Income
Whether you want to rent the property out short or long term, a good rental property will provide a steady stream of income. Long term tenants mean less turnover, and possibly less repairs or maintenance being needed after each tenant. Short term rentals may be rented at higher rates, but come with extra expenses due to the frequency of turnover. Whichever type of rental you prefer to conduct, expenses for the maintenance, repair and upkeep of the property are tax deductible. These expenses can then be used to offset the amount of income tax you’ll pay on the income generated by the property.
You Don’t Have To Buy A Very Expensive Property To Make Money
Investing in real estate doesn’t mean you have to buy the most expensive property on the market. If you purchase a reasonably well maintained property, you can likely rent it out with minimal upfront expense for repairs or renovations. Investing in a real estate property that is move-in ready means you’ll be earning revenue quickly.
It Increases Your Cashflow
Renting out a real estate investment property will provide additional cash flow that can be used for other things such as paying down the mortgage faster, giving you more opportunities for further investment.
Its Passive Income
You don’t need to do much to earn a good income from your rental property. Passive income is generated through the long term appreciation of the real estate, as well as from the tax benefits you receive.
Inflation & Its Impact On Real Estate
When the inflation rate is high, generally, rental rates and property values keep pace with inflation. This gives the real estate investor an advantage since the asset is increasing in value. Mortgage payments, on the other hand, are not impacted by the inflation rate and you’ll continue to pay the same mortgage amount for the duration of your current term.
Tax Advantages
Rental income is added to your taxable income and is taxed at the appropriate rate. That said, the income can be offset by the expenses relating to the investment property. These expenses include mortgage interest, property taxes, insurance, maintenance, repairs, renovations, upgrades and utilities (if included in the rent amount).
You Don’t Have To Do It Alone
If you are not an experienced real estate investor, don’t worry. There are a number of professionals that can help you including real estate professionals, accountants, tax advisors and lawyers. You can also hire a Property Manager to look after the day to day
management of the property, to deal with the tenants and attend to any repairs and maintenance that may be needed. The cost of the Property Management company becomes an expense you can use to offset the income when you file your income taxes for the year.
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