Many of those who succeed in real estate have foresight or the ability to predict the trends in real estate or even the developments that will happen in an area. Some properties do not seem like good money makers but with certain changes in the environment, migration patterns, city developments, etc. they may turn out to be really great investments. Of course, there are risks that need to be taken, and you have to analyze whether you can take the possible failures - emotionally and financially - that may be brought about by these risks. For those who are interested in engaging in such business, here are the top ten reasons people invest in real estate.
1. Real Estate Values Appreciate - this is especially true for areas where there is high demand for properties. Condominiums in cosmopolitan and highly populated cities, for example, can cost an arm and a leg but there it is very unlikely for these properties to depreciate in value especially if they are well maintained. Because of the ever growing world population and the increasing population density in cities, there will always be a demand for real estate. It’s your choice whether you want to be the one renting in the future or if it’s you renting out valuable space.
2. Real Estate Investment offers good profit - Investing in real estate is a proven method of increasing net worth and with a few sound decisions can earn you great profits.
3. Investing in Real Estate Involves Relatively Low Risk - this is true if you have done your homework and invest in good properties. Of course you will need a considerable amount of money to get into this kind of business but at least you know your money is now a tangible asset. You can even buy property under a financing arrangement so you don’t have to shell out all your savings. Some financing companies will allow you to use the property as leverage for your loan. But for this to work you must have good credit history
4. Real Estate can Provide Steady Income - If you have made a good investment, you can recoup your investment from the income that the property will generate in a fairly good length of time. You need to earmark part of the income for renovations and repairs but generally, you should be able to earn good money from your investment.
5. Cash Flow Can be Easily Worked Out - You can arrange your loans and financing so that the monthly income generated from your properties can be greater than your debt payments
6. Real Estate Depreciation Offers Tax Advantages - While your property's value depreciates in your book prompting lower tax payments, it does not mean the property's market value has depreciated.
7. Controlled Profits - There are many ways you can control the profit you make from a real estate property. One such instance is when you improve a house to raise its value. You may purchase properties in bad need of repairs and improve the house so you can resell it or rent it out for good gains.
8. Government Tax Brakes - In the United States, real estate investors take advantage of the 1031 exchange. The 1031 exchange allows for investors not to pay taxes on profits made from real estate sales for as long as the money was re-invested to real estate.
9. Other Tax Advantages - Many tax advantages that can be used when investing in real estate. One of these tax advantages is the reduction on income made from interest payments on amortization. When restoring a historical building, part of the expense is covered by the Rehab Investment Tax Credits.
10. Real Estate Property is a Tangible Asset - When you invest in real estate you have a tangible asset unlike when you invest in stocks where if you don’t play your cads right you can lose all your money. In real estate investing even if you don’t make good profits, you won’t lose your entire investment.
Justin has been investing in real estate for almost two years now, and is a proponent of generating passive income through investment property