In recent years, there has been a lot of hype around the real estate investment world. Where there is hype, there is usually opportunity. When it comes to investing in REAL estate there are a lot of opportunities to start or continue to build long-term wealth for you and your family.
5 reasons to invest in REAL estate;
- Very high returns.
- It is REAL.
- Tax benefits.
- It is up to YOU!
- Appreciation over time.
Stronger returns than basically any other investment in today's market
In today's day and age the banks are offering little to no interest on your money for a standard savings account and you will actually be losing money because of the inflation rate and minimal interest rates. This is where things get interesting and intimidating. Most people look to hire financial advisors or someone else who is qualified to help with their investing.
The main problem with this is that when dealing with 99% of these advisors you will be charged hidden fees around every single corner, once again minimizing your returns. When it comes to Real Estate investing you know what you are investing in. There are no hidden fees only what you see in front of you and how much you want to put into your assets. More and more investors are unloading a lot of capital into the Real Estate market for these reasons.
It is a REAL Asset
Meaning that you can actually touch it, see it, walk through it. As opposed to investing in cryptocurrency, the stock market, bonds which are just pieces of paper or completely virtual. Sure, they are backed by the FED or certain companies but at the end of the day you can not go and see what you are actually investing in.
Incredible tax benefits and credits
One of my favorite tax benefits is the 1031 exchange. A properly structured 1031 exchange allows a real estate investor to sell a property they own and reinvest the proceeds in another like-kind property while deferring all capital gain taxes for a later point in time. This allows investors to amass a larger real estate portfolio in a much smaller amount of time, without having the constant battle of trying to get ahead while paying capital gains on their wins.
ALWAYS, ALWAYS refer to your real estate accountant for the latest tax rules and regulations as this is something that you want to have handled professionally. I am in no way advising you on how to handle or prepare your taxes.
Fact or Fiction!? Diversifying Your Investment Portfolio
We hear from the time we are children to not have "all your eggs in one basket". People accomplish this by investing in different types of stocks, bonds, real estate and more. Investing in real estate is an incredible way to diversify your portfolio in order to minimize your risk and increase the returns on your capital.
However, some of the most prominent investors in our history such as Warren Buffett say that "Wide diversification is only required when investors do not know what they are doing." This is the total opposite of what we were always told. This makes sense though because it is coming from Grandpa Warren who is one of the wealthiest individuals in the world, and not our parents (no offense parents, we know you mean well!).
The moral of the story is to KNOW what you are investing in, in order to truly mitigate your risk. If you want to invest in an asset such as real estate then know EVERYTHING there is to know about that specific market, the asset, the current national economic cycle and everything else involved. If you do your due diligence than you will mitigate your risk and help you and your family truly achieve the generational wealth that we are all looking to build.
Appreciation Over Time
Appreciation is when an asset increases in value. The main reason this happens is when an investor increases the cash flow on an asset. This is done by creating more value through rehabbing it or enhancing the asset in order to make it more appealing so people will be willing to pay more for it.
Historically, real estate assets appreciate by themselves over time. Something unique about real estate is that it is a scarcity and that you can only build so much more if it. Especially in overpopulated areas where they put caps on new construction. This forces prices up via supply and demand. The supply is low and demand is high thus pushing value up and up as time goes on. This is a good reason to play the long game when it comes to real estate investing.
I hope you enjoyed this blog post and that you got some real value out of it. If there is anything that you have questions about please feel free to contact us anytime of the day. We are here to help you however we can, and want to make your real estate investing experience as smooth and successful as possible!