They say the best investments you'll ever make are in yourself and in your future – and what better way to do so than by investing in real estate?
As Franklin D. Roosevelt once said, "Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world."
We took a deeper look at why someone might want to invest and nailed down five big reasons. With benefits like these, the opportunity is hard to ignore.
#1. You will see a steady cash flow.
Did someone say extra income? We sure did. People choose to invest in real estate for the same reason they start any other side hustle – to generate cash flow. Whether you purchase a residential home or commercial property, you can rent it out to tenants or businesses on a monthly basis. Monthly checks will start to roll in and can be used to pay down your mortgage. After that's all squared away, you'll start racking in extra income month by month. If you can stay patient while this happens, the reward is so worthwhile!
#2. There are tons of tax benefits.
By purchasing real estate and renting it out, you can become a landlord…which makes you a business owner! What's so great about that? The tax benefits, of course! Here are just a few expenses you'll be able to write off as business expenses.
- Mortgage interest
- Property taxes
- Maintenance costs
- Homeowners insurance
- Property management fees
- HOA dues
Don't forget to talk to your tax advisor to find out what else you might be able to write off as a real estate investor.
#3. Real estate appreciates in value.
Real estate appreciates naturally at an annual average of 3-5%. This means that without doing anything to your home – aside from maintaining it, of course – it will increase in value. This is unlike a car or machine, where your investment depreciates (loses value) over time.
This is great news for you, as an investor, for two reasons.
- Easier to rent to tenants
- Easier to sell in the long run with earned profit
But, you don't have to let it appreciate on its own. You can also force a property to appreciate by adding value yourself.
This can be done through big and small renovations like these…
- Replacing the garage door
- Finishing the basement
- Updating light fixtures
- Minor room remodels
- Adding curb appeal
What you put in is what you'll get out. The choice is yours!
#4. Investing in real estate can help diversify your portfolio.
A successful investor is one with a diverse portfolio. So, let's talk about why this is beneficial and how you can accomplish this through real estate.
Starting with why this is beneficial, it's really pretty simple. A diverse portfolio is going to do two key things for you. It's going to reduce risk and improve long-term returns.
Investors can choose to put their dollars in numerous assets like stocks, bonds, cash, collectibles, real estate, and more. This culmination is what qualifies as an investor's portfolio.
When you spread your investment dollars across multiple assets – real estate, for example – you can balance risky investments with less risky ones. Think of it like the old "don't put your eggs in one basket" mentality.
Here's what Mark Henricks from Yahoo had to say about this investment in particular.
"Real estate is an especially effective asset for diversification because it is not tightly correlated to the securities markets. When stocks and bonds are down, that is, real estate may be up and vice versa. In this way, diversification helps investors minimize losses due to broad market trends."
#5. There are many different ways to invest.
One of the most appealing things about investing in real estate is that there is no single, dead-set, one way to do it. You have numerous options and the ability to decide what will work best for you.
Here are just a few ideas…
- Multifamily homes
- Commercial properties
- Vacation homes
- Duplexes (house hacking)
- Home flipping
- Investment groups/trusts
As you can see, there is a great deal of opportunity in the investment space if you are willing to put in the work. We hope that after reading this blog, you have a better understanding of why people invest and what that could look like for you.
The Masiello Group is a second-generation family company that has been a trailblazer in New England real estate since 1966. With now more than 35 offices throughout northern New England, we're the largest residential real estate firm north of Boston to offer a complete suite of home services, including buying, selling, mortgage, title, insurance, relocation, and more.
Our agents are eager and excited to meet your real estate needs!
You can find more information on today's market and other real estate trends by reading our blog weekly at https://www.masiello.com/news-and-updates/.