Nowadays when someone wants to build equity and wealth there are plenty of options to choose from. From stocks and bonds to real estate there can be several decisions to make on what makes the most sense to invest in. However, many people build wealth using a basic asset they own such as owning an additional property. Let’s take a look at why real estate is a good investment and how it can build your wealth.
Cash Flow
When you invest in real estate you can generate steady cash flow if you are renting the property out. Add up your gross rent and then subtract your expenses including mortgage payments, taxes, insurance, and maintenance costs.
Great Returns
A long-term real estate investment can have some large returns. Appreciation over time has historically earned many people some substantial equity. Always choose the right location of course so your property will always be in high demand.
Long Term Security
The long-term security of real estate can make it a great investment as time goes on. Also, you are not just waiting for your real estate investment to be appreciated. Instead, you are renting out the property today and earning money every month that you have paying tenants.
Tax Advantages
One of the best advantages to owning real estate is the tax advantages. Per the IRS there are expenses you can deduct from your taxes including things like mortgage interest, property taxes, operating expenses, repairs, and depreciation.
Leverage Funds
Many investors buy their first investment property by taking out a Home Equity Line of Credit (HELOC) on their primary residence. Most lenders allow homeowners to borrow up to 80 percent of their dwelling’s value. So they are using their equity gained rather than tapping into other available financial resources. It’s a real example of having your money work for you.
Inflation Protection
Real estate investing also offers some great protection against inflation. Inflation raises the price of goods, but it also raises wages. Since wage growth is tied to rental prices, you can increase the rent on your rental properties once the current leases expire every year.
Best of all with real estate investing, you are your boss! While it may come with management responsibilities and the like, you are in control of your destiny.
