Real estate investment is the purchase, ownership, management, rental, and/or sale of real estate for profit. Real estate investment includes residential and commercial property. It is considered as one of the more stable investment vehicles compared to stocks and other highly volatile securities.
Below are some of the reasons why investing in real estate is considered safer than others.
Real Estate is a Tangible Asset
Investing in real estate is widely considered to be one of the safest strategies for building wealth. It is less risky than other securities traded on the stock exchange. This is primarily because it's a tangible asset that cannot be easily wiped out in a market crash. Its value maybe reduced but the physical property exists.
Predictable Cash Flow
Whether you're investing in residential or commercial properties, real estate investment offers one of the most dependable cash flow returns available. You know exactly how much money you will be making on a monthly basis, and you know what your capital gains will be when you sell the investment property.
Real Estate Offers Tax Benefits
Real estate investments can provide tax advantages unavailable to most other investments. Some of these advantages include the ability to deduct various expenses that relate to a rental property, like local property taxes, mortgage interest, repair expenses, and insurance. The tax code allows deductions for these expenses, which are considered business expenses that reduce the income generated by an investment property.
In addition to the current tax benefits, you can also defer and potentially eliminate capital gains taxes when you sell your home. This is done through a "1031 exchange," which allows you to reinvest the proceeds from the sale of an asset into another asset while deferring any capital gains taxes on the transaction.
Historically, Real Estate Capital Appreciates Over Time
Capital appreciation is the gain in the value of your property due to an increase in its market value. In other words, it's how much your property is worth compared to how much you paid for it. This happens when the value of properties in your area goes up over time due to a number of different factors: inflation; population growth causing an increase in demand vs limited supply of land; and changes in the economy, among others. But one thing every property owner can count on is that their home will appreciate over time if they take care of it.
Real Estate Offers a Hedge Against Inflation
Inflation is a natural occurrence in all economies. It cannot be avoided but its impact on your investment portfolio can be mitigated. One of the ways to hedge against inflation is investing in real estate.
As we know, inflationary pressures drive the price of goods and services up over time. As this happens, the price of land and homes also increases in value. Hence, counter-balancing the effect of inflation.
With home prices rising steadily over the years, real property has proven itself to be a solid investment vehicle. This is especially true for residential homes as demand for rental properties continues to outpace supply. With more and more millennials opting to rent instead of buying a home, your real estate investment can always fetch you a good sum of passive income every month.
Real Estate is an Accessible Investment
In the days of the past, real estate investment was reserved for those with a large amount of money to invest upfront. But now, thanks to real estate crowdfunding platforms such as EquityDoor, you can invest in real estate projects for as low as $1000.
EquityDoor is an online marketplace for real estate investing that matches developers and investors to bring together capital for real estate deals. Registered under SEC, EquityDoor is authorized to be an intermediary between issuers and investors and is allowed to market its offerings even to non-accredited investors making the pool of investors more inclusive. And by eliminating the typical costs, complexity, and reliance on traditional banks and real estate insiders, EquityDoor’s peer-to-peer lending eliminates the barriers that have blocked access in the past and opens the door to real estate investing for anyone with as little as $1,000 to invest.