As an investor, you may have heard for years that real estate is a great long-term investment, but you may just now be getting serious about taking advantage of these benefits for yourself. There are pros and cons to all investments, and savvy investors will carefully educate themselves about these before making an investment decision. As you explore real estate investments more comprehensively, you will see precisely why you should consider buying an investment property as a long-term investment.
Leverage Your Investment
When you purchase other investments, you typically are required to pay the full face-value amount for the investment. However, with real estate, this is not the case. You can use a real estate loan to leverage your investment, and you may only have to pay 25 to 30 percent of the sales price up-front. Your rental payments from your tenants will pay the mortgage off, adding to your equity with minimal additional contributions required by you. More than that, the full property value will increase through appreciation rather than only by your down payment amount.
Obtain Regular Cash Flow
Many people love to purchase dividend stocks because they can increase in value while also throwing off income. Rental real estate is the same way. You can research your real estate market to learn more about rental rates in your area in comparison to property sales prices. When you make a large enough down payment on the property and when the loan payment is reasonably, you can enjoy a relatively stable stream of income from your qualified tenants. You can also increase rents periodically based on the market to increase your monthly return. While you can enjoy regular profits from rental income, you typical can enjoy a healthy return when you sale the property years from now as well.
Insure Against Your Risks
There are risks associated with buying real estate. For example, a major storm could tear the roof off, or there could be a devastating fire. Real estate is the only type of investment that you can purchase insurance on. This can drastically reduce the risks associated with real estate investing. More than that, your insurance premium is an operating expense that is deductible on your tax return.
Take Advantage of Tax Benefits
In fact, any operating expenses on the property are tax deductible. This includes your mortgage interest, your property taxes, utilities, lawn care, repair and maintenance costs and more. In addition, you can deduct depreciation for further financial benefit. These tax advantages allow you to dramatically offset the tax burden associated with the monthly rental income that the property generates.
It can seem stressful to become a real estate investor, but many investors love the benefits of this type of investment and eventually purchase additional properties to grow their portfolio. Keep in mind that you can hire a property manager to handle the daily operation of the property while you manage it from an investment standpoint. Take time to learn more about your real estate market today to determine if this is the right financial move for you to make.
David Milberg is a financial expert in NYC with nearly 3 decades of experience in the finance industry. He is a long-time owner of Milberg Factors, a factoring and finance company with locations in New York, California, and North Carolina.