Don’t take it from me… a group of investors was recently asked to provide a list of the top reasons that they personally invest in real estate. Here are 10 of the reasons they gave:
1. Real estate has always been a solid investment
Unlike the stock market and other investments which can adjust quickly, real estate has always trended up over time (even with a little slump or a downturn in a market). The real estate market is much less volatile than equities.
2. Real estate is the BEST way to leverage your money
Right now you can buy properties with a small down payment on the amount you paid. If you buy stocks, you’re buying them at an equal dollar amount – one dollar invested equals one dollar of value. But you may be able to buy a piece of real estate that’s worth $400,000 with just a fraction of that amount as a downpayment and closing costs.
Plus, when the market is increasing, the appreciation is on the entire value of the home, not just your smaller investment. Investors call this “cash-on-cash” return.
3. Real estate will always be needed
Everyone must live somewhere. This is truly a tangible asset, and as Mark Twain put it, “Buy land, they’re not making it anymore.”
4. Real estate can provide you with a guaranteed reliable income to retire
Once the house is paid off and you’re left only with ongoing maintenance, your rental income will provide an excellent source of income every month.
5. You can pay off real estate and improve your net worth
You don’t necessarily need more homes, you just need more homes paid off. That is how true wealth is gained. Every month, a portion of the mortgage payment goes back into your pocket as paydown on the principal of the loan.
6. When you borrow to buy investment properties, the interest on the loan is tax-deductible
Investing in real estate allows for certain tax write-offs, including the interest you pay and your maintenance expenses. Speak to a great accountant for more information.
7. Cash flow
When your rental income exceeds your expenses, you end up in a positive “cash flow” situation. This can supplement your existing paycheque and eventually start paying some of your personal expenses with this excess monthly cash.
Real estate investors can do many different types of investing. There is something for everyone. If you get bored with one strategy you can try another one. Commercial, residential, condos, houses, single-family or multi-family are all examples of ways you can invest in real estate. If you don’t want to own the physical asset, many of our clients will lend their money for first- or second mortgages, which also generate a nice percentage return.
9. Long-term wealth building
Investors who buy to hold know that it doesn’t matter where the market is when they buy… twenty years from now, it won’t matter. However, it’s important to note that you can put yourself much further ahead of the curve if you are able to buy for a good deal.
10. Not complicated
If you know how to manage one property, it doesn’t take a rocket scientist to figure out how to manage another one. Mastering the basics of property ownership is not much more than getting a great group of contractors and service providers who can help you keep the physical asset in good working order.
Of course, you can do the work yourself, but paying somebody to service the property allows for yet another tax write-off… and the opportunity to use your time more effectively to find more investment properties!