Trying to decide how best to invest your money can be a daunting task. There are so many options, and the jargon is sometimes so complicated that after you sign all your paperwork, you’re not entirely sure what you just did. One of the best places to begin your investment journey is in real estate. It’s fairly straightforward, and doesn’t need much to get you started. Here are some of the reasons that you should invest in real estate.
With many investment opportunities, the money you have invested is somewhere else, and you can’t do much with it. With real estate, the investment can serve multiple purposes. In addition to the capital gains on the value, you can live in a property, paying down the mortgage rather than paying rent. You can also rent out the property for additional income.
Depending on the market, you there is a higher return on real estate than many other options. There is a significantly higher return when you consider that you’ve only put down a portion of the cost. You can purchase a $200,000 property with only $40,000 down. If you see a 30% return on the purchase price, and sell the property for $260,000, you have invested $40K to make $60K; a 150% return on the money that you put down.
Low Down Payment
You only need a fraction of the purchase price to begin your investment. With most other investment opportunities, you need significant cash flow to invest. With real estate investments, you typically only need 20% of the purchase price. You can even sometimes get away with as little as 5%, although there is usually a monthly insurance payment if you do that. It is the only investment opportunity where you can borrow the bulk of the money you are investing.
Property doesn’t vanish like other types of investments do; and it can be insured against things like fire, accident, or natural disaster. Property values tend to be very stable over time, and even if something tragic happens, you are usually protected against financial loss through insurance.
There is no such thing as no-risk investing, but real estate investments tend to be very low risk. With just a little bit of research you can learn to trade and find out whether or not there are any major economic development projects that will impact your purchase, and whether the property will continue to gain value. Most real-estate investment will always gain over time.
One of the best things about investing in real estate is the tax benefits that you can take advantage of. You can offset the mortgage interest, claim deductions for expenses related to advertising for tenants, any depreciation that the property sustains, repairs, maintenance costs, insurance, and many other things related to owning and running an investment property.
When you invest in real estate, things are much more tangible and in your control. If you want to make improvements to your property in hopes of spurring an increase in value, you can. When you make other types of financial investments, you simply turn your money over to someone else and let them figure out what to do with it. Having ownership of your investment gives you much more power in deciding what to do with it.