Ever think about investing in Real Estate but are wondering about the benefits? Here is a summary of reasons why real estate is a great investment taken from ‘The Millionaire Real Estate Investment’ by Gary Keller.
Accessible
Real estate as an investment is easy to find and understand. Additionally, it’s one of the few investment opportunities where most buyers have access to financing through lenders. Since real estate is an insurable asset, lenders feel secure putting in up to 80-95% of the value of the asset.
Appreciable
Real estate has historically been an appreciable asset over the long term, i.e. the value of the property increases over the long term. This is due to two reasons - general inflation in the cost of construction and materials, and due to increase in demand as populations tend to grow over time.
Leverageable
Most people buy real estate by only putting down a portion of the cost (5-20%), but still see the appreciation on the full value of the property. For example if a person bought a house for $300,000 with a 20% down payment ($60,000), and the property went up by 5%, that would be a return of $15,000 over an initial investment of $60,000. Also, once equity has been built up in the property through payments, owners can leverage the investment for cash in 2 ways - either by getting a loan against the increased equity, or by refinancing the original loan amount plus the increased equity. This means buyers can get access to the cash in the house without having to sell the property.
Rentable
As properties are rentable, it allows buyers to get renters to pay down the debt and build equity in the property. This creates an investment return that can be appreciable as rents typically appreciate over the long term, create debt paydown and have positive cash flow.
Improvable
As real estate is a tangible asset,the value can be increased through improvements either by the buyer themselves (sweat equity) or by bringing in contractors. Buyers can therefore directly affect the value of their investment.
Tax Benefits
As an investment, there are tax benefits in the way of deductions and depreciation that allow investors to lower their taxable income. Deductions allow investors to claim expenses incurred as a result of renting such as property upkeep, maintenance improvements, mortgage interest, etc. Depreciation allows investors to depreciate the value of their property over time and use this depreciation to reduce their taxable income. Consult an accountant for more on these details.
Stable
Real estate offers a stable, less volatile form of investment as property values have historically been slow to rise and slow to fall. It can therefore be a good investment avenue for investors looking for lower risk.
Livable
Your own house can serve as an investment tool and a way to build wealth while still putting a roof over your head. Often investors will live in a home for a few years, and then move into another home while renting the first one and turning it into an investment. They continue to build wealth while still using their investment as a place to live.
If you are thinking of investing in the market, or selling, get in touch and we can set up a no-obligation meeting to discuss the best way forward. I will guide you through the details of these steps and more based on your current needs.
Kyla Miranda Realtor ®
Keller Williams Platinum Realty
709-325-5152