When we talk of investment, the sole reason that comes into mind is to get returns. And there is no second opinion. Similar is the case with real estate investment. You invest in real estate today and get returns (rental amount, sales proceeds, etc.) tomorrow.
Luckily, real estate investment is more than just giving big returns. This single industry is more powerful than many out there. And holds more reasons than just making profits for yourself.
This post will outline the top seven reasons to invest in real estate to support my earlier statement that real estate is more than just making bug returns.
Top Reasons to Invest in Real Investment
Safe and Real Investments
It is common sense that we believe in things we see. This statement also fits well when we compare real estate investment with stock investment.
Stocks are intangibles assets; you own them but do not possess the power to see them or make renovations.
Unlike stocks, real estate is a tangible asset. You could see it, feel it, and renovate it as you like.
Let me clear it further with an example. Imagine if you had invested $1,000 in stocks. It is expected that it would go up, at least in the longer run. And it did go up. But the value of the stock was not in your control. You could never increase or decrease its value by making some changes (only if you directly influence it).
While on the other hand, if you had invested $500,000 in real estate with an expectation, it would go up. And it did. But in this case of holding a physical asset, you have the power to control its value. You could renovate it, upgrade it, rebuild a house (or whatever) and further increase the property’s value.
Being a tangible asset gives you an edge in investing in real estate as it is real and much safer than intangible assets.
Real Estate is Always Appreciating
I will not say that stock always is a bad investment option. Rather they are one of the best investments you could ever make. And they too appreciate in the long run (with some exceptions). But they are relatively riskier than real estate.
On the other hand, real estate is always on the move ahead. Even if it drops down dead, you always had an opportunity to make some other use of it and uplift its value.
To further support how real estate is always appreciating, let us look into Canada’s real estate market trends back in 2020 when COVID-19 hit the world. The market shrunk to its worst. But just a few months later, it grew back with full force and made the year quite happening for the entire market.
And today, experts say that 2021 will be a profitable year for Canada’s real estate, including the residential market. According to some real estate trends for 2021, it is expected that the residential properties will witness an average raise of 6%.
Bungalows for sale in Burlington alone is expecting a growth of 7% this year. This means if you buy a bungalow in Burlington today for $1,000,000, you could expect a sales proceed of $1,070,000 a year later, giving you a profit of $70,000 within just a year.
Upgrading to Further Enhance the Value
Have you ever heard of flipping properties? A flipping property (houses here) is when you buy a house for less than its market value, renovate it, put it for sale, and receive higher returns from the sales proceeds.
Imagine you acquire a bungalow for less than its market value (as it required some renovations). You upgrade it (rework the floorings, roof, upgrade appliances, or add a pool). These are all tangible improvements, and anyone can compare the before and after-results of the house. You did to uplift its value and then sell it at a profit margin. This is flipping a property.
This could be a reason to invest in real estate, and it could also become a challenge if you did not take wise steps.
The challenge with flipping houses comes when you unnecessarily spend too much on renovations and elevations. And ask for a price that may not justify the market value. People may decline your offer as they could get the same house for less and then upgrade it according to their needs and wants.
If you are ready to take the risk and invest in flipping properties, make sure, you make the right moves. When upgrading a house (or any property), keep in mind what buyers may buy in the future. Would they prefer a house with modern appliances, or would they bring their own?
Equity Building with Real Estate Investment
Besides the returns you expect from investing in real estate, you are actually building your equity. Even when it is still on the mortgage, the part that you own is your equity. And as you keep on paying the mortgage, the entire property would ultimately become your sole equity.
Imagine a situation where you could acquire multiple properties, and with time they all become your equity. In time, you could either sell them, rent them out, or pass them on to your children as your legacy. Sounds amazing, right?
This leads us to the next reason for investing in real estate; they become your legacy.
Real Estate as Legacy for Your Children
There is no doubt that when everyone is earning in times like these, it is not enough to buy a piece of property. If you dare to invest in real estate to increase your assets, you could also imagine passing it on to your children so that they do not face the financial constraints as you did.
It reminds me of a story I read on the internet. Bernie and Marion, a couple living in Northern Ohio, acquired s a piece of land in the 1980s for $10,000. Besides dreaming of building a house on it, they could never transform their dream into reality. And today (by the time I heard about them), that piece of land worth over $1,000,000. They now intend to pass on this land as their legacy to their children. And their children, who are fully grown up, could invest a little more, build a house on it, and pass it on as their legacy.
This legacy could go on forever, and yet that piece of land is not going to vanish. Though, the house could start decaying over time. But not the land. If needed, that house could be demolished sold out to someone else, or the owner could rebuild a new house on the land. And continue their legacy.
Real Estate Investment as Tax Relief
In the US, you could deduct mortgage interest from your taxable income.
For investment properties, you even get an opportunity to deduct operating expenses and costs, insurance, property taxes, and maintenance.
In the US, taxes on capital gains range between 15% and 20%. These are usually lower than personal taxes and could become an advantage over other kinds of investments.
Offering tax benefits, in the US, if you acquire another property from the first property’s sales proceeds, you are not taxed at all.
These rules are typically applied in the US and may differ in other countries. Do consider talking to your real estate agent when you plan to acquire a new property from the first property’s proceeds to take tax benefits.
Real Estate as a Mode of Livelihood
To make it a continuous mode of income, you need big investments. If you have this kind of money, you could invest more and more in real estate and start renting them out. The rental income could become your permanent source of income.
Or, if you are willing to take risks, you could sell the house, gain profits, reinvest to acquire another house, and resell it for a profit. This could go on forever.
As said earlier, the bungalows for sale in Burlington today are expected to sell for as high as 7% within just a year. So if you buy a bungalow today, rent it out for a year, and then resale it, you would not only gain a profit from the sales proceeds but would have received rental income spread over the year.
These are two easy ways to convert your investment into a permanent source of income. There are tons more options like these.
What is Your Reason to Invest in Real Estate?
The chances are high that you already had plans of investing in real estate when you landed this blog. You just needed a little more convincing to make it easier for you to make your move.
I have tried to share some of the top reasons for investing in real estate this year. There could be more. But these are enough for you to invest and get all the benefits from this single investment.
Share in comments the most convincing reason you found to invest in real estate.