Why You Should Consider Investing In Real Estate

As the old saying goes, “If a job’s worth doing it’s worth doing well.” In real estate, we have a different saying:  “If a property’s worth your time, it’s worth your investment”.

Yes, investing in real estate can be profitable. And yes, it can guarantee you a steady future income stream that can sometimes triple your ROI. If it didn’t, you probably wouldn’t be reading these words right now. But there’s one motivation that virtually no property investment gurus talk about:

The challenge.

Just like you, there are thousands of other Colorado investors who have decided to try their hand in  the game of real estate investing. Some have been quite successful while some fold right before hitting their big win. What they fail to realize is that it’s not a game. It requires finesse. It requires foresight. And it requires getting your hands dirty. That’s what makes it so rewarding.

But aside from the challenge, there’s are also some substantial investment advantages in real estate. If you’re still debating why you should join the fray and start investing in real estate, here are some reasons you may not have considered before.

Tangible Assets

Real estate is, quite literally, a brick and mortar affair. Unlike other investments, the demand for physical property is a basic human need. Stocks can fluctuate. Futures are never written in stone. Regardless of the volatility of any market, the need for shelter (be it commercial or residential) is a constant. Real estate has physical value, one which doesn’t just diversify your investment portfolio, but also gives it a definitive shape that can weather any economic uncertainty.

A Hedge Against Inflation

There’s a direct correlation between GDP growth and real estate demand.  While there are thousands of factors that contribute to national GDP growth, real estate doesn’t only remain a consistent player, but rather it frequently exceeds expectations by almost three percent in the second quarter of 2019.

Both supply and demand are critical factors in both personal investments and collective GDP growth. The increased demand for real estate means increased rents, and subsequently, increased capital values. By incorporating this increase in capital appreciation, real estate serves as a definitive backbone to any national and state economy, which is one of the reasons why there’s a greater tax advantage in real estate than in almost any other industry.

Tax Deductions

No one likes the idea of having to pay taxes on an investment, and you’ve likely  heard horror stories about property taxes. The fact is you can use your investment in real estate to qualify not only for personal deductions (including property maintenance and mortgage interest), but also by claiming depreciation, which is a particular tax code incentive property owners can utilize, even when their property actually appreciates in value.  By claiming like-kind properties under a 1031 tax exchange, you can defer the gain from the sale of any property to a similar property being purchased for your own personal investment to optimize an even greater tax advantage.

Leveraging Your Investment

As mentioned earlier, the need for real estate will always remain consistent.  What isn’t consistent, however, are mortgage rates. While you may need to shop around in order to find the best rate, real estate investors typically have an advantage when it comes to mortgages – sometimes, in excess of well over 25 percent.

By leveraging a mortgage in lieu of your initial capital, the percentage of net cash flow gained by renting property to tenants can be placed towards other residential purchases, ensuring not just a consistent income stream, but an investment which can maximize your return. Once you’ve established sufficient equity in one property, it can either be secured by a second loan or refinanced for the original mortgage loan amount plus the actual value of the equity itself. It’s a process that can be repeated across multiple properties. In both instances, you’ve established a robust cash flow that doesn’t just optimize your investment. It transforms it.

If you’re still considering whether or not you should invest in real estate, It’s not a question of whether there are  advantages. Rather, it’s a question of how you can maximize them.

Investment strategies may come and go, but the demand for real estate only increases. Find out the leading tips from professionals with almost  75 years of combined experience. Visit Colorado REIA today.

 

Brandon Boyd
 

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