Have you recently had a windfall, and are not sure what to do with your funds to make the most of them? Or perhaps you are getting to the stage of greater financial stability, building up savings, and want to invest your money wisely.
There are many options available when it comes to investing your money: stocks and bonds, property investment, and putting your cash into a savings account. Stocks and bonds can deliver high returns, but also carry high risks. A savings account guarantees more security, but returns are low. Investing in real estate therefore can be a good middle option: moderate returns, with little risk in the long run.
In case you are still unsure, here are 7 great reasons to invest in real estate.
1. Property is a Great Long-Term Investment
Although real estate prices fluctuate up and down, in the long term property has consistently been a great investment in the long term. If you look at real estate prices over the decades, you will always see overall upward trend even when there have been shorter terms dips. Therefore, when you put your cash into property investment you can be assured that you will see good returns. Investing in real estate, with some exceptions, will not deliver huge short-term gains, but you will almost definitely see a return on your funds in the long term.
2. There are Great Tax Benefits
Owning property gives you a range of tax benefits which can provide a welcome boost to your finances. In the US, for example, you can claim the interest you pay on your mortgage as a tax deduction. Anyone how has had a mortgage knows that this can be a significant saving. New limits mean that homeowners can deduct the interest on up to $750,000 of mortgage debt for couples, or up to $375,000 for individual filers.
3. Properties Give Passive Income
Earning passive income is essentially the dream for most people: after all, who wouldn’t want to earn money for doing nothing? Owning real estate allows you to do just that: having one or more investment properties can be a great way to generate profits through rental income. Of course there is some work involved, especially at first, but you can set things up so that your properties are managed for you and income will roll in with you having to do very little. This is particularly true as your investment portfolio grows, and you leverage equity in your first investments to buy more properties. The more properties you own, the larger the ratio of passive income to effort you need to put in.
4. It Lets You Build Your Equity
One of the key advantages of property investment is that you are building your ownership of real, tangible equity. You will own bricks and mortar properties which you can leverage to make other investments, and/or use as a guarantee on loans and other ventures. The best part is, the more equity you have, the easier it is to build more equity.
5. There Are Some Great Overseas Investment Opportunities
There are some great investment opportunities which can be found in overseas real estate markets. By taking a global view of property investment, you can find some amazing deals which allow for a great return on your investment, by investing in the right city at the right time. Sites like bayut.com can let you search for properties in foreign cities, as well as providing data on property price trends over time for different neighbourhoods and property types.
6. Property is a Great Way to Diversify Your Portfolio
As any financial advisor will tell you, the key to being successful in investment is in diversifying your investments. By putting your money into different areas, you are protected if something adverse happens in one of these areas: such as if the stock market crashes, or the real estate market suddenly dips. Real estate is a great low-risk investment to balance higher risk aspects of your investment portfolio such as stocks and bonds.
7. Property Investment Helps Build Cash Flow
Investing in real estate lets you increase your cash flow over time. Firstly, you can generate income through renting out your property or properties. This income will increase overtime as you pay down on your mortgage, so even if it first rental income is not sufficient to cover your mortgage payments and other operating expenses, this will soon exceed it by far. Secondly, once you pay down your mortgage you will have available equity which you can use to open a line of credit or redraw funds against the value of your property. This can be useful in certain situations when you need capital, for example to make further investments.