Stable returns, tax advantages, and other benefits make real estate investing a great way to grow your wealth. Being successful in real estate investing requires dedicated research, passion, and much more. Real estate investment tools like Privy can help you get the data you need to make informed decisions for a successful strategy - are you ready to get started?
Let's first look at four reasons why people get involved in real estate investments.
1. Building Value with Low Volatility
This investment philosophy of using investment properties to generate stable returns appeals to investors who want to hedge their bets.
Think about it – equities always have the same amount of risk, no matter where you are in your portfolio timeline. They can spike, or they can go to zero.
Now contrast that with the very different model of investing in real estate. You start out with less of a stake in the tangible asset as well as value invested grows over time. Whether you rent out properties or rely on price appreciation, you’re compounding your original investment with a lot less risk then what you have in the stock market.
2. Concrete Collateral
In addition, the model with investment properties is very different from how traders invest in stocks, commodities, and futures.
In real estate deals, you have a tangible asset – the property. It's made of wood and stone and brick. It’s able to be appraised on a market: a market that generally evolves toward growth, rather than just expanding and contracting in a vacuum.
That's one of the major things that attracts investors to real estate investing and flipping investment properties for profit.
3. Real Estate Investing and Portfolio Diversification
Maybe you started out in the stock market, and you want a way to protect yourself from crashes. Or maybe you just want a change.
Some investors view real estate investing as a great addition to other forms of investment. Maybe you have money market accounts and CDs – or you're involved in exchange traded funds. Even if these funds are fairly stable, real estate can be a valuable anchor for your portfolio. It means you'll have money in this very different investment model if something should happen to the stock market as a whole.
Diversification is key – just ask Warren Buffett!
4. Tax Advantages of Real Estate Investing
Another reason to focus on real estate investing becomes clear when you look at your tax ledger. Annual filings give investors multiple opportunities to write off taxable income on real estate. Mortgage interest and operating costs are two of the big ones. You can also look at other aspects of your investment properties, such as property taxes and how they appear on a schedule C or some other part of your annual tax return.
In a nutshell, real estate investing has its own unique advantages for investors. Don't ignore new advances in real estate markets and new opportunities to grow your bottom line by making sound real estate plays. Take a look at what an REI tool like Privy can do to help you to run the data and build a stronger foundation for real estate investing.