5 Smart Reasons to Use Real Estate as a Financial Investment

5 Smart Reasons to Use Real Estate as a Financial Investment

If you find yourself wishing for a financial windfall, it may be time to take action. Investing in real estate is a safe, trustworthy way to line your pockets with some cash. The sooner you get started, the better.

1- Great Returns

Real estate offers great returns, especially compared with other types of investments. For instance, the S&P 500 index has historically returned almost 10 percent per year since the 1930s. In comparison, consider that homes in the United States have averaged an annual return of about seven percent since 1890 and have outperformed almost all other common investment options during this time. If you include your primary residence as part of your portfolio, which is a wise move, you can boost your return to nine percent.

2- Steady Cash Flow

Another key advantage of investing in real estate is its steady cash flow stream. It is especially true if you are fortunate enough to pick up a rental property that generates cash from renters and tax benefits. In addition, most homes come with clearly defined debt obligations, making them easier to understand than most other investments. Furthermore, home ownership comes with an enormous amount of freedom.

3- Tax Benefits

Investing in a rental property can generate significant tax benefits. The first and most important is the depreciation cost savings you would receive if you took out a mortgage to purchase the home. After subtracting the original down payment and interest payments, you should be able to deduct a substantial amount each year from your taxable income. You can also save money on property taxes by renting out a home located in an area where your municipal government does not impose an assessment for property taxes.

4- Long-Term Security

If you are buying a home for yourself as an investment, it is important to remember that the longer you own the house, the more leverage you get in the transaction. In other words, if you buy a $100,000 home and sell it 10 years from now for $150,000, with no down payment and no commissions paid, you would still have a profit of $50,000. That means that even if prices go down in the short run, which is one of the major concerns people have with real estate as an investment, there is little or no risk to your principal in the long run.

5- Fulfillment and Control

For many investors, the final reason why real estate is such a good investment is the feeling of fulfillment that comes with it. Owning a home can provide freedom, security, and structure in your life. In addition, while you are investing in real estate, you are also building something that can increase in value, an accomplishment that no other investment can boast.

Real estate is one of the most reliable investments that you can make. That is because real estate typically has a low failure rate, unlike many other types of investments. In fact, real estate is one of the most stable and profitable forms of investment there is.

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