by Super User
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7 Reasons Why You Should Invest In Property
7 Reasons Why You Should Invest In Property

7 Reasons Why You Should Invest In Property

Investing in real estate can provide several different things: you can re-sell real estate, you can use the equity you have in the property to buy other properties, or you can just buy to sell when the property appreciates in value.  You can get consistent cash flow and long-term investment turnaround. Renting is the best way to invest in real estate; it’s the core of the market.

You can also manage your investment properties yourself or outsource this to a specialist property management company.

Here are 7 reasons why you should take the plunge and buy investment property.

1) The ability to access the funds to invest

Real estate has high leverage. You can get a loan more easily for real estate than for other investments like business startups etc.

Getting financed to begin fulfilling your investment goals is easier when you invest in real estate.  A key reason for this is the Bank will take the property as security against the loan and they are more confident that you and they will get a return on this time proven investment.

2) Higher Return on your Investment

High leverage and a high return on investment (ROI) go hand in hand. When you use borrowed capital for an investment, you are only using a small portion of your own money to invest in the property, which helps you get a better return on your investment in the long run.

Furthermore, when you rent to tenants, you expect their rent to cover not only marginal expenses, but also to pay off the interest payable and principle on your loans. This allows your overall return to exceed many other types of investments.

3) You can Diversify Your Assets to gain optimal longterm Appreciation

One of the first lessons you learn about investing is the power of diversification. In order to see real benefits without too much risk, it is smart to invest in many markets. Real estate is its own market and your asset is the property itself. Having real estate as an asset is beneficial because it appreciates over time.  

Even despite property demand vs supply ups and downs from time to time, it’s safe to assume a reasonable level of appreciation in the long term, normally this is somewhere around 10% per annum. The value of real estate can rise and fall, but it is considered a safer, steadier market, especially in the long haul.

Moreover, in real estate, you have the ability to research the market based on the location you want to invest in. You can learn the trends and make a more informed decision about the market, which makes for a less volatile investment compared to others, like the stock market.

4) You can take advantage of Tax Benefits

Owning real estate allows for many different kinds of tax deductions, like the ones below:

  • Interest: Landlords can deduct interest from mortgage interest payments on loans used to buy or improve the property. You can also deduct interest on credit cards used for goods or services used for your property.
  • Repairs: The cost of repairs is deductible in the year in which they are done. For example, if you repaint, fix the floors, or replace any broken appliances, you can deduct these costs.
  • Home office: If you work from home and manage the property yourself, then you can likely deduct home office expenses from your taxable income, provided you meet certain requirements. This is true whether you own your home or whether you are also a renter.
  • Insurance: You can deduct insurance premiums from any insurance policy that has to do with your rental investment. This includes landlord liability insurance, flood/fire/theft insurance.

The benefit of using tax deductions is self-evident as you keep more of your taxable income in your pocket!

5) You can keep pace with Inflation, Property is relatively Inflation Proof

Rising inflation is more easily combated in real estate than in other markets. This is because as prices rise, so will the value of your asset. When you use leverage to buy real estate at low interest rates, you more easily ward off inflation.  Inflation endangers investments because it can lower the value of your assets.

But in real estate, you own an asset that “rises with the tide,” which is a great way to protect your wealth. The rise of rent means that you will be pocketing more money, which will be necessary as inflation makes all goods more expensive (like the cost of repairs and appliances).

6) You can provide a great source of Retirement Income

Real estate investment is most valuable over the long term when gains can be seen from appreciation. That’s why real estate is a great platform for retirement income. Income on rental properties is considered passive income, meaning it generates money with less work compared to other income-generating jobs.

7) You have total flexibility with your investment, you can Sell or Buy when you want too

Real estate is a good investment platform because you can sell whenever and however you choose. Although it’s recommended to hold onto your property over the long term, there are no fixed rules. You govern the decision on when you sell. You can also use different exit strategies to maximize your profits. The power is in your hands. Due to appreciation, you are likely to sell your property at a higher price tag than what you bought it at, which makes selling an exciting and profitable end goal to your investment!

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