Top 14
Reasons to Invest In Real Estate Right Now
Investing
in real estate today is one of the best ways to diversify your
portfolio. Even if you have retirement savings and a taxable
investment account, there's always room and reasons to invest in
real estate.
Why
Should You Invest In Real Estate Right Now?
Whether
you're saving for retirement, setting up a legacy for your
children, or just want to increase your monthly cash flow,
investing in real estate may help you reach your goals
faster.
Here are
the top 14 reasons to invest in real estate now.
1. You
Can Earn a Regular Cash Flow
Real
estate provides monthly cash flow, something other investments,
like stocks and bonds, don't provide. Your cash flow is the rent
charged minus your expenses, including your mortgage payment,
maintenance, costs, taxes, and insurance.
As you
pay your mortgage down, your cash flow will increase. Whether you
use the cash flow to supplement your income, or you save it to
invest in yet another investment property you find on Roofstock
Marketplace is up to you. Cash flow, no matter how you use it,
is nice.
2. Real
Estate Appreciates (Usually)
Real
estate appreciates over time, usually. Even if you didn't pay your
mortgage down (which you will), the home itself may appreciate it.
If you buy and hold real estate for a while, you may walk out of
the transaction with great capital gains, plus the cash flow you
earned along the way and the equity you earn by paying the mortgage
balance down.
3. It
Will Always Have Value
Real
estate doesn't depreciate, or usually, it doesn't. Even though it's
a tangible asset, like a car, it appreciates rather than
depreciates. Even if a home loses value, you can always count on it
being worth something. Even rundown homes are worth
something.
4. You
Have a Say in the Property's Value
There
aren't too many investments you can control or semi-control its
value, but real estate is one. If you maintain or even improve a
property, you may increase its value. Not every home improvement
increases a home's value dollar-for-dollar, but many do and provide
a decent return on the investment.
The most
profitable renovations are kitchen and bathroom renovations, but
not even full renovations. Updating the kitchen or bathroom to make
it more modern or functional can improve a home's value, giving you
around a 50 - 60 percent return on your investment.
5. Real
Estate Investments Give Great Tax Breaks
Uncle Sam
takes a portion of everyone's income, but you can lower your
liabilities by taking advantage of tax breaks when you own a
business. Real estate investors are business owners and can take
advantage of those breaks.
Real
estate investors may deduct the cost of owning and managing the
property, including the cost of fixing it up or maintaining it. In
addition, the IRS allows real estate investors to depreciate the
property over its useful life, which is 27.5 years. This means you
can deduct a portion of the cost of buying and improving the
property each year.
6. You
Can Earn Equity Which Increases Your Net Worth
As an
investment property appreciates and you pay the mortgage down, you
earn equity in the home. Equity is the difference between the
mortgage balance and the amount you owe. As you pay the mortgage
down, you increase your equity.
Since
equity is the portion of the real estate you own, it increases your
net worth. If you sold the home, you'd receive the difference
between the sales price and the outstanding mortgage
balance.
7.
Investment Real Estate Provides Financial Security
Since
real estate appreciates, it can provide financial security. You
know you can sell the home for more than you bought it if you hold
it for a while. Even if the market falls for a period, it should
bounce back if you hold onto the asset long
enough.
But, if
you need cash now, you can tap into any existing equity by
refinancing with a cash-out refinance. This allows you to keep the
property, allowing its value to continue increasing while you use
some of the equity for your current needs.
8. You
May Earn Higher Returns than the Stock Market
The stock
market provides an average 1 - 2 percent annual return, whereas
real estate offers an 8 to 9 percent average annual
return.
While
there's no way to predict 100 percent what any investment will do,
there's a greater chance of decent returns with real estate. To
maximize your returns, diversify your portfolio with stocks, bonds,
and real estate to take advantage of all
opportunities.
9. The
Cash Flow Is Predictable
Stocks
and bonds don't have a cash flow, and if they do, it's
unpredictable. A dividend stock, for example, may pay dividends,
but you don't know how much or when. When you invest in real
estate, you know your cash flow because you determine the rent you
charge and your monthly expenses.
It's
easier to budget or monitor your returns when you know what to
expect. This is especially great if you use the cash flow to
supplement your regular income.
10. Real
Estate Is a Great Source of Passive Income
If you
charge enough rent and account for inflation through the years,
your real estate investment can provide passive income. You don't
have to work for it actively. Even though you'll have to perform
repairs and maintenance, there won't be much to do if you keep up
with it, yet you can enjoy monthly cash flow if you own the home.
It all starts with finding the right property on sites like
Roofstock
Marketplace.
11. It's
Great for Retirement Income
Saving
for retirement gets confusing. There are 401Ks, IRAs, and pensions.
There are tax rules and maximum contribution limits that make it
hard to reach your goal unless you start when you're very
young.
Then
there's the issue when you don't have enough money to save for
retirement. When you own real estate, it's like a forced retirement
savings account. As you pay the (required) mortgage payments, you
earn more equity in the home, building your retirement
savings.
12. You
Can Use the Rent to Pay Your Mortgage
If you
buy a multi-unit property and live in one unit, you can use the
cash flow to pay the mortgage on your home. It's like having
someone else pay your mortgage.
Want even
better news?
Anyone
can use this house hack and get an FHA loan on a multi-family unit.
As long as you live in one unit, they consider it an owner-occupied
purchase, which means you need only 3.5 percent down and have
flexible underwriting guidelines.
13. There
Are Many Options
If you
look at Roofstock
Marketplace, you'll see the many options you have for real
estate investments. Here are two common ways to invest in real
estate:
-
Fix and
flip - You buy a rundown home, usually for a low value, pay to fix
it up, and sell it for a profit.
-
Buy and
hold - You buy a home that's in decent condition (or even a
fixer-upper), fix it up, and rent it out for years, earning the
cash flow.
You can
buy a single-family property, condo, townhome, or multi-family
unit. You can even buy multiple properties and increase your real
estate portfolio and profits even further.
14. You
Don't Need a Lot of Money
Many
people assume you must be rich to invest in real
estate.
You
don't.
You can
start with little money. It can even be gift funds you use for the
down payment or equity from your owner-occupied home. The point is
you don't need hundreds of thousands of dollars to invest in real
estate right now.
Many
mortgage programs, including conventional, FHA, and subprime
mortgage programs, provide you with the necessary
funding.
If you're
investing for the short-term (fix and flip), you can even use hard
money lending to buy a home. Since you'll sell the home fast, you
won't have the high-interest loan for long.
Use the
Reasons to Invest in Real Estate Right Now to Create Financial
Security
If you're
looking for reasons to invest in real estate right now or you
wonder if it's right for you, now is the best time to jump in.
Interest rates are low, and home values are high. You'll get into
the market in time to enjoy incredible growth while keeping your
expenses low.