When some people think about building a financial nest egg, they envision owning a home. And, yes, homeownership is a great idea in addition to investing in other asset classes.
However, you can also go the extra mile on the property investment front and buy one or more investment properties to benefit from monthly rental income and property appreciation.
While property ownership is a goal for many, doing so responsibly is vital for the best results. Last year, total consumer debt was $17.1 trillion, up 4.4% from $16.38 trillion the prior year. Buying rental property can wait if you’re struggling to pay off high-interest debt.
If you don’t have a ton of money sitting in an account, investing in a real estate fund could be a better option than buying properties outright. Invest.net, for instance, simplifies the process of investors buying into real estate funds that buy attractive assets on the market.
But if you have debt under control or are debt-free and want to be a rental property owner, here are five reasons to invest in real estate.
1. Passive Outcome
One main reason people buy rental properties is for the passive income. If you purchase a two-family home and rent it out, you can get rental income from two families. You might hire a property management firm to make things even easier. A property manager will provide landlord services for a percentage of rental income. That includes maintaining and repairing the property, handling tenant concerns, collecting rent, finding replacement tenants, and more. Working with a property manager can make passive income a reality.
2. Appreciation
According to Statista, the annual appreciation for single-family residences in the U.S. was 6.5% last year. The percentage was higher than average in some states. Homeowners in Vermont and Rhode Island, for example, realized annual home price appreciation exceeding 13%.
People invest in homes for their families and rental properties because of the potential for property value appreciation. If you buy investment properties in desirable areas and retain them over the long haul, you’ll be rewarded financially when you eventually monetize them.
3. Tax Advantages
Yet another reason to consider investing in real estate is the potential for tax advantages. It’s best to hire a CPA to find all the tax benefits you’re entitled to. You can write off expenses connected to mortgage interest, property tax, depreciation, repairs, and other things. Again, it’s a good idea to hire an accountant to ensure you get all the tax benefits available in whichever state you live. The tax advantages can make investing in rental properties an especially enticing proposition.
4. Substantial ROI
Investing in real estate can also lead to a high return on investment. That’s one reason some people engage in house flipping, which involves buying homes for less than they’re worth, remodeling them, and reselling them for a tidy profit. The key is to pay the right price for real estate in the right areas — and to sell the real estate at the right time. The more home renovation skills you have, the better. It can be a great way to make a lot of money in a short period.
5. Minimal Volatility
Yet another benefit you’ll get by investing in real estate is low volatility. Real estate isn’t impacted in the way many other investment classes are. If you’ve invested in stocks or cryptocurrencies, you know the prices can go up and down quickly. Not so with real estate. If you want to invest in something more stable and less volatile than other options, consider a rental property.
You can benefit in various ways by investing in real estate. So, it’s worth considering.
