Categories: Business

Should You Invest In Real Estate?

Whether you’ve been impressed with the gains you made on your family home or you’re exploring various investment options, there might come a time when you wonder whether real estate is a wise investment opportunity.

After all, some people are happy with their nine-to-five job salary, while others want to see if more income opportunities exist elsewhere.

As challenging as it can be to invest hundreds of thousands of dollars in multiple properties, you might decide to consider it for some of the following reasons:

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Real Estate Doesn’t Have To Be Risky

While no investment is entirely risk-free, real estate can often be less risky than other investment opportunities, such as stocks.

For example, if you invest in managed funds, the risk of your investment can be inherently less because you’re investing alongside other people and sharing that risk.

If you choose a reputable investment management company, you can also enjoy desirable features like management expertise, direct asset management, and robust governance. Someone else manages your money and does all the hard work while you sit back and count the profits.

You Can Build Equity

Whether you’re a homeowner with one property or a property investor with multiple, you share one thing in common: the chance to build equity.

It can sometimes feel like you’re on the mortgage treadmill with no way to get off, but each mortgage payment you make contributes toward more equity in your property, allowing you to increase your net worth month on month.

The more equity you have in your property or properties, the more leverage you have to purchase more properties in the future. Multiple properties can mean more cash flow and, eventually, more wealth.

You Can Benefit From Appreciation

It’s easy to assume that earning money requires hard work, but it can sometimes be as easy as biding your time.

Appreciation is a desirable benefit associated with real estate investment, whether you’re buying to rent your property out or to flip it for a profit at a later date.

While the property market can experience slumps occasionally, FRED economic data paints a telling picture of property gains over time. In the first quarter of 1963, the median price of a house sold in the United States was $19,300.

This had increased to $90,800 just 20 years later in 1983 and sat at $516,500 by the first quarter of 2023, 40 years later.

You Can Enjoy Tax Breaks

Very few people enjoy paying taxes, but we know it’s a necessary part of life if you earn any income. However, you might not have to pay as much money to the government if you own property.

Many real estate investors are able to take advantage of tax breaks and deductions that prove helpful during tax season. In most situations, these deductions include the costs of owning, operating, and managing a property.

As properties can depreciate over their useful life, you can explore tax deductions throughout your many years of property ownership and might even be able to defer capital gains with a 1031 exchange.

Investing in real estate is a significant decision to make, and not everyone will be convinced that it’s right for them. However, with the potential to enjoy some of the benefits above, it might be something you consider now or in the future.

Disclaimer: The above references an opinion of the author and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice. Invest responsibly and never invest more than you can afford to lose.