Real estate is one of the most common and popular investment options for many reasons. It can generate high amounts of passive income on a consistent basis. Also a fantastic investment for the long term when one considers the appreciation factor in any purchase.
According to Forbes magazine, Real estate investment has been recorded as the number one method for creating millionaires in the United States. Anyone who is keen on building wealth should consider investing in real estate as part of their portfolio.
Investing in real estate should not be considered a “get rich quick”, or “get rich easy” strategy. Real estate investment requires the investor to do research and dedicate time in managing their portfolio.
Getting started in real estate is likely to cost a considerable amount of money upfront. Purchasing a home, an apartment building, or land in most cases, does require capital. Monthly bills and/or maintenance add to the cost as well. Having said that, there are many benefits to real estate investment.
If you are looking to invest in real estate in 2021 it is important to choose investments that have great track records of producing long term wealth.
Real estate prices plummeted in many US cities a number of years ago. Then the pandemic hit and now as many people are looking forward to returning to “normal” life they are also looking to purchase properties. Real estate is on an upward trend in many cities currently.
This does make today a perfect opportunity to buy. Sales prices and interest rates are down and they will go up in the coming years. Some reasons why real estate makes for a great investment:
Real estate investing gives the investor plenty of leeway and flexibility concerning the deal. If maximizing returns is the goal, then renovating the property and selling it for full market value is an option.
Alternatively, if renovating the property is not an option, then renting the property out would be a perfect solution. Rental income provides a steady income stream to investors.
Also, in the event of a recession. Many people may make the decision to rent a house rather than purchase, in order to save money. Which means if you plan on utilizing the buy and hold strategy to produce long term wealth. You will be able to rent the house out and create a positive cash flow.
Real estate investment offers a great opportunity to generate a positive monthly cash flow.
One way is to rent the home to a tenant. Consider for example, your mortgage payment was low. You could rent the home out as long as the rental rate is greater than the mortgage payment. This would allow the property to create a positive monthly cash flow. In some cases, the cash flow may be enough to pay for any unexpected expenses the property may incur.
Another great way to utilize your property’s cash flow is to reinvest the money into upgrading the property. Still giving you the opportunity to continually develop monthly positive cash flow.
Unlike stocks, bonds, or paper investments. When you invest in real estate, you will own physical, tangible assets. When the housing market goes south. The paper value of the property may decrease.
At least you will know that the asset itself has not been eliminated. You can still use the property to generate a positive cash flow. This tangibility offers you the peace of mind in knowing that your home will never completely lose its true value. Which is an advantage that real estate has over stocks and bonds.
Furthermore, the fact that housing prices can fluctuate over time means. You can gain more equity in your investment as time passes by. Worst case scenario, if the value of the house only went up at the rate of inflation. The home would still gain a 3% increase in value. Which leads to more wealth over time.
If you decide to make a real estate investment. It is likely that you will want to purchase multiple properties in order to gain a larger ROI. Perhaps the most appealing feature of real estate is that it allows you to utilize the bank as leverage.
For example, normally the bank will only require a 10 – 20% down payment in order to finance an investment property. After you have purchased your investment property and the property value goes up, the equity in the house will also increase. While your initial investment remains the same.
Also once the equity in the home rises, you will have the opportunity to use that equity as collateral to purchase other investment properties. This makes it possible for investors to grow their real estate investing portfolios quickly using very little cash. Thus creating long term wealth.
Most home owners will receive some form of mortgage deductions when they file their income taxes. Likewise real estate investors also get tax breaks.
One way is when they purchase a home for the sole purpose of renting it out. They can write off the cash they used when fixing it up.
Another tax break available to real estate investors is claiming repair expenses when fixing and flipping the home as capital expenses. By claiming capital expenses, you can offset the profits you earned by paying less in taxes.
When considered from many perspectives, the question of “is real estate a good investment?” you should agree by now that it is.
The majority of other investments do not offer such leverage, tax incentives and tangibility as investing in real estate. Which makes it one of the most popular investment methods of 2021.
The South Texas Wholesaler
J.R. Medrano is a real estate investor who specializes in wholesaling inherited homes. He has been wholesaling real estate in the Corpus Christi, TX area for the past 6 years. If you would like some honest advise about wholesaling houses. Feel free to contact him at anytime.