Real estate is one of the strongest asset classes, especially in the long term. It is secured by a physical asset and is in fact, a stable investment.
Investing in property is also likely to keep its value and will increase over time.
So, why should you invest in real estate? For those with the financial means to buy property, several opportunities will be opened once they invest in it. Here are reasons why you should invest in real estate.
Earn cash right away
Depending on the type of investment property and the technique with which it was obtained, investors can immediately generate money when they invest in real estate.
For instance, if you buy a turnkey property investment, that will then be refurbished with an occupant ready. You will then get your initial rent check by the end of the first month.
Steady income return
A notable aspect of a real estate investment is the large amount of overall return. From 1977 to 2007, nearly 80 percent of US’ real estate return came from income flows.
Investments that depend more on income return are likely to be less volatile than those relying on capital value return.
Investing in property is also attractive, especially when it is situated where Treasury rates are low.
Equity is established over time
Monthly cash flow is not the only thing a real estate investment can provide. They can establish equity as well.
Every mortgage payment performed is completed with the proceeds from your tenant’s rent. When you pay a mortgage using the money given by your tenant, you’re basically having someone else pay for your investment.
Portfolio can be diversified
Real estate has a low, and sometimes, a downbeat relationship with other major asset classes. This means the addition of real estate in a portfolio can lessen its volatility and offer a higher return.
Similar with the situation when you are in a stock market, you have the chance of performing property investments that suits your risk profile.
Inflation hedging potential
Real estate gets its inflation hedging capability through a positive relationship between GDP and demand for property.
As economies expand, the demand for property pushes rents up, leading to higher capital rates.
It could also keep the buying control of capital by passing some of the inflationary pressure on tenants, and by containing some of that pressure in the form of capital appreciation.
Investment capital can be leveraged
When you utilize the borrowed capital to boost the earning of an investment, then you’re using the potential of leverage.
Additionally, since real estate is a hard asset, funding is readily offered. The return of a leveraged property investment is significantly higher than a non-leveraged investment.
Investing in property offers a number of tax deductions that the other types don’t have. Here are some of the tax deductions available to a real estate investor:
- Interest paid on mortgage
- Property taxes
- Repairs and maintenance
- Business-related travel expenses
The Bottom Line
Real estate investment can basically go well with almost every investor’s portfolio. It is also a unique asset class that is simple to understand. Proven to be a steady investment, it is an ideal asset class for creating a stable investment portfolio.
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