What Makes Real Estate Investment the Best Option for Building Wealth

Jul 17,2017  Arrow Properties

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A careful investment is capable of bringing life-altering changes by providing you with ample funds for turning your dreams into reality. These days, people have a very diverse investment portfolio which comprises of bonds, gold, stocks, etc., but they rarely include real estate in their portfolios.

This is surprising because countless kingdoms have fought many great battles over land, leaving no stone unturned just to gain control of this priceless asset. Even though kingdoms have ceased to exist now, the demand for land hasn’t.

It might sound a little intimidating, but with the help of a good Real Estate Investment Firm in Inland Empire, you can capitalize on this opportunity for progressive cash flow, profitability, liquidity, tax and diversification benefits. Fascinating, isn’t it?

Investing in real estate is no rocket science but it still requires a little bit of homework for making the most of it. The following is a list of reasons that make property investment a serious contender for minting a lot of money.

  1. Rental Yield

One of the best ways of making easy money on a property is by giving it on rent. As the name suggests, Rental Yield is the percentage yield from a property in the form of rental income. It is calculated by deducting all the expenses (such as mortgages, insurance, taxes, repairs, etc.) from the rental income and then dividing the result with the initial investment/down payment (Cash-on-cash Rental Yield).

  1. Appreciation

Appreciation is one of the biggest advantages of investing in the real estate sector. As a matter of fact, the real estate prices always go up in the long-run. However, the market might experience a small slump at some point in time, but the forces of demand & supply soon bring everything back on track.

Some investors also appreciate the value of a property by making some enhancements, because of which the estate demands a premium over its total (purchases + cost of enhancements) value.

  1. Tax Benefits

Real estate offers a plethora of tax benefits which makes investing in it a better bet. To begin with, the government considers the income from real estate as capital gains, which falls under a lower tax slab than the income from employment.

Also, the taxes on investment properties tend to decrease with time as the taxation system has a provision to depreciate them over the years. Additionally, in case someone is generating cash flow from a rental income, he/she can continue enjoying it, as there is no self-employment tax levied on the same. For more details on the subject matter, consult a reputable Real Estate Investment Firm.

  1. Inflation Hedging

Here is a lesser known fact – rent and inflation are directly proportional, which means when the inflation rate rises, rent also shoots up; but the mortgages and other expenses remain the same. This generates additional cash flow without altering the expenses, which, in turn,increase the net rental income from the property.

  1. Leverage

Leverage is a very powerful tool for purchasing estates, and, if used smartly, can provide jaw-dropping results. Here is an example which demonstrates the same. Let’s say investor A purchased a house for $100,000 on cash. One year later, the value of the house increased by $5000, which means the ROI for A is 5%.

Investor B opted for 80% finance, thus putting in only $20,000 cash for making the down payment. A $5000 rise for his $20,000 means a whopping 25% return! As B had spare $80,000, he could easily purchase a couple more estates in a similar fashion. This way, his $100,000 can generate a much higher ROI! This explains why the experienced investors prefer this course of action for their investments.

These are some of the reasons which make real estate investments a solid option for steady returns. However, one needs to be careful while treading this territory as even the smallest mistake can turn into a major disaster. You can avail the services of a seasoned Real Estate Investment Firm to minimize the risks and have total peace of mind.

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