11 Benefits Of Investing In Real Estate

What separates high earners from multi-millionaires?

The answer: investment. Good investments put your money to work, building up capital over time to become the cornerstone of any fortune.

And, of course, you can invest in almost anything. From budding start-ups to shares in multinational corporations such as Amazon and Walmart, there’s no end to the potentially lucrative - or risky - investment strategies at your disposal.

So, with that in mind, why should you invest in real estate?

1. A steady income

Of all the available investment strategies real estate is one of the most reliable you’ll find. Put simply, whether you're looking at long-term rentals or vacation homes, there’s almost always a market for real estate which, in practical terms, translates to a healthy, regular income.

If you’re looking for simple, low-risk income, then real estate really is the perfect solution for you.

2. Tax benefits

One thing that people often underestimate are the tax benefits of investing in real estate. For such a lucrative industry, real estate taxes are relatively low compared to similar investments.

In practice, there are three major tax benefits to real estate investment:

• No income tax
• Tax breaks on a wide range of fees and expenses
• Lower taxes for long-term investments

While these benefits might not sound particularly earth-shattering, when you compare real estate to other investment options, this industry has one of the lowest tax/income ratios there is.
 

3. Secure in the long-term

Let's face it, not all investments are as stable as others, and if you’re looking for reasons why you should invest in real estate, then this is one of the big ones. Real estate is safe and reliable - so long as you don’t take any major risks that is.

The reason for this security is that real estate - unlike some other markets - will always be in demand. While the price of housing does fluctuate over time, the necessity for it does not, meaning that demand usually outstrips supply. So much so, in fact, that over the long term you can almost always expect your property to increase in value.

That being said, you should also be aware of market bubbles. At times, the value of houses may go through periods of volatility, often spurred on by major political decisions or world events. This might sound like a concern but once again, compared to other industries, real estate is relatively safe. That is to say that while the value may fluctuate wildly here and there, in the long run, your money is about as safe as it could ever be.
 

4. Protected from inflation

Another major benefit of investing in real estate is that you are functionally protected from inflation. In fact, while inflation is a problem for most people, it can actually be beneficial to real estate investors as it tends to increase the value of their properties.

Again, the reason for this comes down to the long-term appreciation of housing. People will always need somewhere to live and while the population is always increasing, the available land isn’t. In effect, this seriously lowers the chances of houses ever depreciating in value over the long term.
 

5. Benefits the outside community

Of course, investing in real estate isn’t just good for you, the landlord. Putting money into housing, be it existing housing or new developments on land you already own, can be massively beneficial to communities as it can regenerate an area and even raise the value of surrounding properties.

In particular, buying and running vacation properties can do a lot to bring tourism into areas that are reliant on it. The more appealing your property, the more money you bring into the local area and the more the town prospers.
 

6. A variety of investment options

It’s important to understand that real estate isn’t just one market, and if you want to really maximize the benefits of investing in real estate, then you should absolutely consider your options.

First of all, as we alluded to earlier, you don’t have to buy existing properties. While the upfront cost will be significantly greater, the potential profits of purchasing land to develop can also be much higher. This is because developing the land yourself allows you to research the local area and build the right properties where they are needed the most.

For example, given the recent major shift in office culture towards working from home, many people are moving to more rural areas. As a result, the value of private offices in more rural areas has gone up significantly as many people decide to find their own workspace a little closer to home.

On the other hand, if you are investing in pre-existing properties, then you still have a wide range of options to choose from. Once again, it’s all about understanding the needs of the local area. Do people still shop on this high street? Is there demand for lots of low-income housing or for larger family properties?

These are all questions you should consider very carefully before investing because the more you understand the market, the more profitable your investments will be in the long term.
 

7. A passive income

If all that sounds like a lot of hard work, then don’t worry too much. While it’s true that, short-term, there is something of a learning curve to real estate investment, once you’ve got yourself set up with a property and a sensible management strategy, the income from that property is largely passive.

Passive income is about the best form of income there is because it frees you up to pursue other ventures with your time. On the one hand, you could use the money to largely retire whilst still earning a reasonable wage. Alternatively, if you’re looking to build up a business, that extra time will come invaluable as you develop more income strategies.
 

8. Easy to create leverage and finance

You have to spend money to make money - we all know that old adage - but the more money you have, the less money you have to spend. At least, that’s how leverage works. With a major real estate portfolio behind you, other investors - such as banks and credit unions - will be more willing to work with you, giving you far better rates on loans than you would otherwise have.

Essentially, the more you build up your portfolio, the more you will be seen as a reliable entity. This is good because better rates on loans means faster deals and more money in your pocket when all is said and done.

9. Diversification

We mentioned before that Amazon and Walmart are both large, multinational corporations, and do you want to know how they got where they are today?

In a word, Diversification.

When Amazon began it was a small online book retailer, while Walmart started its life as one local store. Over time, as both companies proved successful in their respective fields, they expanded out into other industries, building up their companies into large-scale brands that could produce and distribute a huge variety of products worldwide.

This is about the most stable business model you can have because the more you can successfully diversify your business, the more risks you can afford to take.

In recent years, for example, Amazon has invested large amounts of money into the gaming industry where they have as yet failed to capture a major foothold on the same level as companies like Microsoft and Sony. They can afford to sink this money into gaming in hopes of one day becoming a serious player in that industry because the company is propped up by a huge number of other successful ventures.

The same rules apply to real estate.

When you first start buying real estate, you want to look for safe markets with reasonable profit margins, but the more you build up a portfolio, the more risks you can afford to take.

The benefit here is that it’s far easier to diversify a real estate portfolio than it would be with most other businesses. The reason for this is that there are many types of real estate - apartments, houses, vacation homes, low-income rentals, condos, etc, - and all of them are relatively safe investments. This means that you can diversify your business much more quickly than you otherwise might, leading to stronger, more stable income.

10. Build capital

A business doesn’t happen overnight. It takes time to grow, and for most start-ups that means it’ll be a good few years before they have any real capital. With real estate, however, from the moment that property is occupied, you can start building capital. Obviously, you’ll have to factor in reasonable costs such as repairs, insurance, and security, but when all is said and done, every property you own should be contributing to your overall capital, and the more capital you build, the greater your investment opportunities will be.

11. You are your own boss

Last but not least, perhaps the most compelling reason why you should invest in real estate, is that you will get to be your own boss. You’ll be the one calling the shots and you’ll be the one taking home the profits.

If you’re the kind of person who likes to make your own decisions and feel in control of your life, then real estate investment really is the path for you.