We’ve seen the real estate market take some serious turns in the wake of the pandemic, interest rate fluctuations, and the latest round of inflation. The question many people have is whether or not real estate still makes a sound investment in 2022, and the answer is yes.
However, there’s a big difference between buying the house you want to live in for the next several years and buying an investment property. Buying a house to live in doesn’t necessarily make you a real estate investor.
What does? To become a real estate investor, you’ll need to acquire properties (either alone or with a group) that you rent out or flip and sell. It takes work, but it comes with some major benefits.
Ready to learn more? Read on to learn about the benefits of becoming a real estate investor.
Rental Properties Give You an Income Boost
While investing in real estate does come with upfront costs and the cost of maintenance, careful buying and pricing will guarantee more money in your pocket. Having tenants means getting paid monthly rent on top of your current income or salary. This can allow you to invest in more real estate, pad your savings account, or live the lifestyle you’ve been dreaming of.
Real Estate Provides Inflation Protection
Inflation is a complicated subject but it always means one thing: higher prices for goods and services–and that includes higher rent. Very few industries offer their employees a raise every time the cost of living increases. When you are charging rent, however, you can raise it just about every year to keep up with inflation so long as you are staying within your local and state laws.
Real Estate Diversifies Your Investment Portfolio
No matter how smart and experienced your financial advisor may be, no one can predict with certainty how things like the stock market will go, which exposes investors to a great deal of risk. The best way to take on the risk of growth without becoming too exposed to the possibility of losing it all is to diversify your investment portfolio. Stocks and mutual funds are great but offsetting their volatility with something more stable (like real estate) is important.
Real Estate Puts You at the Wheel
Who doesn’t dream of creating their own schedule and designating their own workload? Becoming a real estate investor is a great way to become your own boss whether you have a full-time job or you’re looking to make a transition. You get to make decisions about what types of properties to buy, how much involvement you want to have in their maintenance, when you’re available to tenants, and how many tenants you want to take on.
You Don’t Have to Do the Work
Maybe you’re thinking, “I thought investing in real estate meant generating passive income, not being my own boss.” If you don’t want to take on the work of maintaining your properties or meeting with tenants, you don’t have to. Instead, you can designate some of the income you make from your rental properties to hire a property management team that will take care of all of the day-to-day stuff for you.
Plus, not all real estate investors buy properties to rent out. Others invest in properties that need work, handing over that work to developers or renovators who then make the property more livable and more valuable. This is a process called flipping, and it involves no tenants whatsoever.
Real Estate Comes With Tax Advantages
What if generating more income through rental properties puts you in a higher tax bracket? Does that mean that you’ll be paying more in taxes? This will depend on the specifics of your situation, but the important thing to note is that your rental properties will come with tax advantages.
For example, many of the costs associated with your rental properties may be tax deductible. Plus, if you sell your property at a higher price than you paid for it, that difference will be taxed as a capital gain, rather than income. In other words, it will be taxed at a lower rate.
There Are Different Types of Homes and Properties to Invest In
Real estate investors don’t all have identical portfolios. There are tons of different types of homes and properties that you can invest in, ranging from single-family homes to apartment buildings to commercial or industrial properties. This is important because it gives you the opportunity to research your local real estate market and needs to make the most lucrative decision.
Keep in mind that there are pros and cons to any type of property. For example, single-family homes are often easier to maintain but won’t yield as much income as an apartment building. Commercial properties can cost more in maintenance but often, the tenants are more reliable and stay for longer periods of time. Evaluate the types of work and risks you’re willing to take on in addition to your local market.
Find more info about the different types of properties and investment opportunities you can choose from.
You Don’t Have to Buy a Property Outright
What if you don’t currently have the cash to purchase your own rental property? The good news is that you don’t have to buy properties outright or on your own if you don’t want to. REITs (real estate investment trusts) allow you to invest in and benefit from real estate without owning an entire property on your own.
Are You Ready to Become a Real Estate Investor?
Any smart investor knows that diversifying is crucial. Becoming a real estate investor is a great way to diversify your portfolio and protect your assets while boosting your real-time income.
Looking for more tips and tricks to protect your wealth? Do you want to keep your finger on the pulse of real estate? Take a look around for the latest news and guides.