July 14, 2021

Key Reasons to Invest in Real Estate

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Key Reasons to Invest in Real Estate

Traditionally, many investors have used the stock market as a place for investment funds. Although stocks are a well-known investment option, not everyone knows that buying real estate is also considered an investment. For many prospective investors, real estate is appealing because it is a tangible asset that can be controlled, with the added benefit of diversification.

In this article, we break down the benefits of investing in property as opposed to stocks, give a comparison of their respective historical returns and risks, as well as some additional things you should keep in mind.

1. Tax advantages

Real estate investors can take advantage of numerous tax breaks and deductions that can save money at tax time. In general, you can deduct the reasonable costs of owning, operating, and managing a property. There is no doubt that one of the major advantages of investing in residential properties is that even if the rental income cannot cover all the expenses, you can still enjoy tax benefits. This makes the tax incentives for investing in real estate extremely attractive.

At the end of the financial year, you must pay out of your pocket all the expenses, such as loan repayments, municipal fees, and utility bills-all of which can be used to offset your taxable income.

2. Capital growth

The great thing about real estate is that as long as you have patience, it is likely to rise. The Australian real estate market has surged by 412% in the past 25 years and continues to rise. Nevertheless, within a certain period of time, the return is considerable, which is part of the reason why it is so easy to obtain a housing loan, because the bank considers it a very safe investment.

Even better, when you have a strategy to spend time in the market, as long as your financial situation allows, any time is a good time to invest. Always remember that the time on the market is better than the timing of the market.

3. You can hire a property manager to take the hassle out of it

One of the advantages of investing in real estate is that if you hire a property manager, it really won't take up too much of your time. You can perform hands-on operations such as setting up inspections, reviewing potential tenants, and following up rent with professionals at a relatively low price, up to a few hundred dollars a month.

The only problem is that the service quality of property managers varies greatly. Before hiring someone, please read our guide to find a good property manager.

4. Passive income

Another benefit of investing in real estate is that you can turn it into an additional source of income. If you choose to actively adjust your property, then you will consider earning extra cash every month without having to do much. The extra income stream can go a long way in feeling financial freedom.

5. Ability to leverage

Once you have an investment property, it will become easier and easier to expand your portfolio when you use this simple strategy: leverage.

Suppose your first investment property rises, which means you have more equity. You can then refinance the property and use your new equity pool as a deposit for another investment property. This is a great way to get around the test of frugality and saving for down payments.

6. You can increase its worth

Another reason to buy investment properties instead of stocks is that you can personally participate in increasing the value of your investment.

You can increase the value of your property in various ways such as the new paint job, replacing the old floor, kitchen or bathroom renovation, building a granny flat, and more.

Disclaimer: The views, information, or opinions expressed in this blog post are for general reference only and should not be relied upon. We have not considered specific facts or circumstances, and no part of this blog post constitutes personal financial, legal, or tax advice to you.

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