Solid Reasons to Invest in Real Estate
Real estate has a predictable cash flow
Cash flow is the net spendable income derived from an investment after all operating expenses and mortgage payments have been made. A good real estate investment should provide you with 6% or greater cash flow.
Real estate appreciates in value
Since 1968, appreciation levels for real estate have been 6% per year, including during the downturn in the economy beginning in 2007, according to the National Association of Realtors.
Real estate provides equity buildup
Most real estate is purchased with a small down payment, with the balance of the money being provided through debt financing from a lender. Over time, the principal amount of the mortgage is paid down slowly at first and then more rapidly toward the end of the amortization period. This principal reduction builds equity.
Real estate is improvable
One of the most unique and attractive advantages of real estate is that it is improvable. Because real estate is a tangible asset made of wood, brick, concrete and glass, you can improve the value of any property with some “elbow grease” and “sweat equity." Whether the repairs are structural or cosmetic, do-it-yourself or hire someone – the principle is the same. You can make your real estate worth more by improving it.
Real estate coincides with retirement
When real estate is purchased, the cash flow is lower and the principal reduction on the mortgage is less. Over time, the mortgage is paid down, or paid off, and the cash flow increases. In some respects, it’s a forced savings program, yielding a greater amount as time goes by, which is a perfect investment for retirement as it increases in cash flow down the road.
Real estate is tax deductible
Tax codes allows various deductions for the normal expenses incurred in owning real estate, such as property upkeep, maintenance, improvements and even the interest paid on the mortgage. The deductions can offset income and reduce your overall taxes.