The Top 10Reasons to Invest in Real Estate

If you search the phrase “Investing in Real Estate” online, you will definitely get nearly 100,000,000 results.

Clearly, many people are interested in investing in real estate today, and who can blame them?

Given everything that is going on in the world today, it’s easy to see why so many investors are considering investing in real estate rather than a stock market that can swing from bull to bear and back again in the blink of an eye.

Here are 10 of the most important reasons why so many people today believe real estate is the best investment available. Has been in history and will continue to be the most lucrative and reliable investment.

1. Monthly earnings

Monthly earnings are comparable to dividend-paying stocks. When you invest in turnkey rental property and hire a local property manager to handle the day-to-day details, your time on the investment is limited to monthly performance reviews with your manager – and potentially depositing your monthly profits.

Possibility of increased equity due to appreciation

Since 1965, home prices in the United States have generally risen, with only one minor correction in 2008, when the Global Financial Crisis struck. According to the Federal Reserve, the median sales price of a house has increased from $165,300 to $327,100 (as of Q1 2020), a nearly 98 percent increase over the last 20 years.

Use leverage to increase returns.

Many real estate investors use a conservative LTV of 75 percent (25 percent down payment and 75 percent mortgage) to increase cash flows exponentially while diversifying and growing a rental property portfolio. Leverage allows you to use OPM (other people’s money) to increase your ROI and cash-on-cash returns, which can increase your wealth.

2. Direct investment control

When you invest in the stock market, you are entrusting your money to people you don’t know to manage it for you. Investing in real estate, on the other hand, gives you complete control over how, when, and where you invest.

3. Protect yourself from stock market volatility.

According to a recent MarketWatch article, there is only about a 40% correlation between real estate and stocks during a bear market. When assets have a low correlation, they are less likely to rise and fall at the same time, which is why real estate is frequently touted as a hedge against stock market volatility.

Inflation protection Real estate, in addition to being a hedge against a bear stock market, has historically been a hedge against inflation. While the overall inflation rate has been around 37.4 percent over the last 20 years, home prices have increased by nearly 98 percent during the same time period.

Real estate investors benefit from more than just an increase in market value.

4. Business expenses that are deductible

Leasing and management fees, repairs and maintenance, property taxes, and mortgage interest expense are all fully deductible costs of owning real estate. When the right rental property is purchased with conservative leverage, the tenant’s monthly cash flow pays for these operating expenses while leaving extra money as net income.

5. Tax advantages such as depreciation

The IRS allows real estate investors to deduct non-cash depreciation from their taxable income. Over a period of 27.5 years, you can deduct 3.636 percent of the value of your property (excluding the land) from your taxable net income.

6. Section 1031 exchange to defer capital gains tax

Tax law in the United States is especially favorable to real estate investors. In addition to deducting business operating expenses and depreciation to reduce your taxable net income, you can also use a Section 1031 exchange to postpone paying capital gains tax.

You’ll have more capital to invest in real estate if you use a 1031 exchange to sell one investment property and replace it with another.

8. Real estate self-directed IRA

According to the Federal Reserve, the average retirement plan balance for families in the top half of the income distribution ranges from nearly $250,000 to approximately $650,000. Given the current state of the stock market, it’s easy to see why more investors want to take control of their savings. By establishing a self-directed IRA, you can use your retirement plan to invest in real estate while retaining the same tax benefits as traditional IRAs and 401(k)s.

9. Invest whenever and wherever you want.

Real estate investing is a numbers game. The more offers you make, the better your chances of finding a seller who accepts. And the more thoroughly you investigate potential deals, the better your property’s financial performance will be.

When you have an investing strategy to follow and an end goal in mind, it’s easier to pick and choose. While you shouldn’t fall victim to ‘analysis paralysis’ there’s also no reason to jump at the first deal that comes along. Instead, wait for an opportunity that makes sense, then seize the day by sealing the deal.

Create your own business.

10. The real estate industry has one of the lowest entry barriers. It’s one of the simplest businesses to start because you don’t have to spend a lot of money on a storefront, salaried employees, or inventory that doesn’t generate income until it’s sold.

In fact, there are at least eight different ways to invest in real estate with $20,000. (or even less). Furthermore, as you build your own real estate business, you will be giving back to the communities in which you work.

Hiring local contractors and property managers stimulates the economy, the rental property provides much-needed housing for the community, and volunteering for charities is a great way to let people know who you are and what you do.

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There are many things to know about buying commercial real estate. One thing to know is that commercial properties are usually bought in bulk and not one by one. Another thing to know is that there are different types of commercial properties, such as office buildings, retail spaces, industrial spaces, and multi-family properties.

The Top 10 Reasons to Invest in Real Estate

Given everything that is going on in the world today, it’s easy to see why so many investors are considering investing in real estate rather than a stock market that can swing from bull to bear and back again in the blink of an eye.

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