Investors seeking to broaden their investment portfolios have traditionally gravitated towards real estate investment. And it’s not hard to see why. Investing in real estate provides numerous benefits that other investment options simply can’t match. A tangible asset, real estate is something you can see and touch. Unlike stocks, mutual funds, or bonds, which are intangible assets, real estate offers the satisfaction of ownership and control over your investment. Whether you are renting a residential home or leasing commercial space, knowing what you are getting makes understanding the value easier.
Property appreciation is a major advantage of investing in real estate. Historically, property values have been appreciated over the long term, even without guarantees. Holding onto your property for several years or more will increase its value significantly. Rent from rental properties generates cash flow after paying expenses (such as mortgage payments, taxes, and maintenance costs). If managed properly, Brad Zackson rental properties can provide consistent monthly cash flow that keeps appreciating over time.
- Depreciation- Property depreciation can be deducted from taxable income by real estate investors each year.
- Mortgage Interest Deduction- Rental property investors can deduct interest paid on their mortgages from their taxable income.
- Capital Gains Exemption- Capital gains exemptions are available to you if you sell your rental property after owning it for more than a year.
- 1031 Exchange- This tax code provision allows real estate investors to defer paying capital gains taxes on selling one property by reinvesting the proceeds into another similar property.
Real estate is also an excellent hedge against inflation. Property values and rents rise as prices rise, protecting other investments like stocks and bonds from inflationary pressures. Other asset classes do not give investors as much control as real estate. Rent can be determined by who lives and pays rent at your rental properties. You can also decide when to make upgrades or repairs to increase its value. This level of control makes it easier to maximize returns and mitigate risks associated with owning investment assets.
Real estate investment offers diversification benefits that are not possible through traditional stock and bond investments alone. In addition to reducing overall volatility, real estate can generate long-term returns and reduce risk. Real estate offers multiple investment strategies that cater to different investor types and goals. For example, invest in rental properties for cash flow or flip properties for short-term profits. It allows investors to leverage their investments by borrowing money to finance their purchases.