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What Are the Benefits of Investing in Real Estate?

There are an endless amount of benefits that come along with investing in real estate. After all, the population continues to rise but earth isn’t getting any bigger.

Real estate can provide you with diversification, cash flow, tax benefits, and capital appreciation. If you’re curious what the benefits of investing in real estate are, read on. We’ll cover everything you need to know. 

What Is Real Estate Investing?

Before diving into the benefits of investing in real estate, let’s start with the basics. What is real estate investing?

Simply put, real estate investing is when one purchases real estate with specific investment objectives. You can purchase real estate to diversify your portfolio, hedge against a turbulent stock market, produce consistent cash flow, or you predict the property itself will appreciate at a healthy rate over time.

Real estate investing can come in many shapes and sizes. 

Types of Real Estate Investment Opportunities

On a high level, there are numerous ways one could invest in real estate. The most common options include: 

  • Investing in a fixer-upper: This is when one purchases a home that needs a great deal of work. The investor completes the work themselves, or hires contractors to complete the work, and sells the home for a profit. 
  • Investing in a multi-family house for rental income: People will always need a place to live, and a multi-family home, in the right area, could help generate free cash flow. 
  • Commercial real estate is another common option: Instead of renting your property to residents, a commercial real estate investor will rent their property to a business. 

9 Benefits of Real Estate Investing

What exactly are the benefits of investing in real estate? Here are our top 9 favorite benefits! 

Asset Appreciation

First and foremost, real estate can appreciate in value over time. Considering you can purchase real estate with leverage (which we’ll touch on below) the property appreciation can provide you equity as you hold the property.

If you decide to sell your property after it has appreciated, you could stand to make a healthy return. 

Tax Benefits

There are also plenty of tax benefits of investing in real estate. As a real estate investor, you can deduct: property tax, property insurance, repairs, mortgage interest, and marketing expenses.

You can also depreciate the asset, which reduces your overall tax liability. Last but not least, you will be taxed via capital gains instead of income taxes if you ever sell your property. Capital gains tax tends to be lower than your typical income tax. 

Portfolio Diversification

Although 2020 and 2021 brought a surge in the real estate market, generally speaking, the real estate market is less volatile than the stock market. This interests investors as it allows them to add diversification to their portfolio.

Instead of holding stocks or bonds, a real estate investor could own numerous properties to diversify their asset portfolio, which ultimately reduces their risk exposure. 

Consistent Cash Flow

Generally speaking, investing in multi-family homes, commercial real estate properties, or apartment complexes will all provide consistent cash flow. Of course, the investor needs to be mindful of vacancies and tenants who will not consistently pay rent, but if you rent in the right area, and do your due diligence proactively, you can reduce the risk of having a tenant who is late with paying rent. 

Hedge Against Inflation

Real estate also provides a great hedge against inflation. Keeping your cash in a bank account will not appreciate as quickly as inflation.

Therefore, the purchasing power of your dollar is reduced over time. Investing in real estate allows your investment to appreciate with inflation, or above the typical inflation rate. 

Passive Income

If you’re looking for passive income, real estate may be the perfect investment option for you. As mentioned above, real estate can provide consistent cash flow.

As the property owner or landlord, you will of course have your fair share of issues to deal with – such as a leaky pipe, running toilet, or roof damage. However, passive income is certainly possible, and in fact, one of the most desirable benefits of investing in real estate. 

Invest Where You Want

As a real estate investor, you can also invest wherever you want. If you want to own property in your hometown, you can do so. If you want to own a vacation home that you rent out all summer, you can do so.

You can purchase property in any state you want. Just be mindful you may want to travel to your investment property from time to time, so bake in the travel costs to your overall return on investment calculations. 

Self-Directed IRA for Real Estate

You can also use a self-directed IRA to invest in real estate. This technique also provides a long list of benefits, including tax benefits and diversification.

If you feel like the stock market is too risky for your retirement, real estate investing may be more suited for you. 

Ability to Use Leverage

One of the most powerful benefits of investing in real estate is the leverage a real estate investor is given. You do not need to have 100% of the money to purchase a real estate property.

For example, you can purchase a $1,000,000 property with a down payment as little as $200,000 – $250,000. This leverage can quickly multiply your rate of return. 

Get Started Investing in Real Estate

The sooner you get started in real estate investing, the better. After all, the more time you allow your money to work for you, the more money you can generate.

We mentioned our top 9 benefits of investing in real estate above, but the reality is, the benefits of investing in real estate are endless. If you’re interested in investing in real estate but you’re not sure where to begin, consider leveraging Realty Mogul.

Realty Mogul does the hard work for you and carefully reviews each deal. As an investor, you can select which real estate deal is most aligned with your goals and risk tolerance.

Before making any investment, it’s wise to work with a financial advisor. A good financial advisor will help you assess numerous asset classes to determine which one is best for you.

Additionally, real estate shouldn’t be your only investment. A financial advisor will also help you make investments in the stock market, bond market, and address retirement plans.

Generate Passive Income — Realty Mogul

As an accredited investor, take the guess work out of real estate investments. Real estate investments often provide excellent returns. Get started with $5,000 as the minimum account value.