Every investor out there aims to reap both financial and nonfinancial benefits from their investments. Real estate investments are among the most lucrative investment options you may want to consider. But first, you need to know the benefits associated with purchasing a home or commercial property.
1. A steady flow of income
The steady stream of income is one of the main reasons most people invest in real estate. This comes from rent. Depending on your location, you can reap huge benefits from rental income. For example, building rental houses near a university or a college has earned most urban people a lot of money. This is because the demand for student accommodation is very high and you are sure your houses will never lack tenants
If the rent you charge is more than the cash-carrying costs of the commercial property, you will get positive cash flow. Note that cash carrying costs take into consideration the debt service, estate taxes, capital improvements, insurance, maintenance, management fees, utilities, and more. Positive cash flow from real estate businesses makes it possible for retirees to provide for or supplement their retirement income.
2. Financial freedom
The success of real estate investments depends on many factors. So, never think that the financial benefits of these investments come on a silver platter. Some of these factors include tenant management, property management, and more. Making sure everything is appropriately managed will ensure better monthly income.
When you are sure at the end of every month, whether you work or not, you will get income from your real estate investment, you no longer need to worry about money. Besides, these benefits are not just for a short period, but for many years you will continuously earn passive income.
3. Portfolio diversification benefits
Investing in real estate protects against inflation. It also offers the investors a chance to diversify their portfolios and enjoy the benefits of owning properties or physical assets. These are tangible assets that investors can easily monetize through residing in the property or renting it out.
This makes real estate investments far more resilient against changes in the markets, compared to bonds, traditional stocks, and other similar assets. Property investments are a broad category of viable investment options, which may include physical gold, art, collectibles, and more. The tangibility of property investments affords investors a sense of stability during bear markets or the so-called short-term sell-offs.
4. Wealth and Equity Building
One of the top benefits of investing in the property market is being able to build equity in the future. Equity is simply an asset that’s part of the investor’s net worth. As you continue to pay your mortgage, your equity continues to increase. That means you have more leverage to acquire more rental properties and boost your cash flow.
5. Tax benefits
There are many reasons to consider investing in the property market. It is a proven approach to accumulate wealth and help generate enough monthly income. Besides, you can enjoy tax benefits that can help get higher returns from your investments.
Rental property owners enjoy several tax exemptions. For instance, self-employment tax does not include rental income, tax breaks provided by the government for property taxes, legal fees, travel expenditure, maintenance costs, insurance, and depreciation of properties save real estate investors money.
6. Community development
The attractiveness and beauty of our communities is something many people are proud of. Property development makes the community better. It also determines the value of that community. Such factors are the reason the price of homes in various places is different. The more developed a community is, the higher the cost of homes. This also promotes economic development in such areas.
7. The value of real estate increases over time (appreciation)
Commercial real estate is an attractive investment for many people and institutional investors. Over the past decade, the amount of resources chasing the ownership of commercial real estate has been increasing. This is because renal income is increasing as the demand for these properties increases.
When done properly, real estate is a profitable investment option with much potential for success. These investments are associated with many benefits, such as financial freedom and sufficient monthly income.
Disclaimer: This content does not necessarily represent the views of IWB.