Real estate investment has been one of the best ways to generate solid cash flow, get tax breaks, create equity, and to create long-term and sustainable wealth for quite a while now.
There are two main ways to invest in real estate. One is to invest actively, where your main source of income is generated through real estate investment. The other is to create additional cash flow through passive investments.
In this article, we aim to create awareness about all the benefits you can get by passively investing in real estate. So, without further ado, let’s begin!
Generating Passive Income Through Real Estate Investment
In this world of capitalism and opportunities, there are many investment opportunities out there. You can invest in stocks, bonds, or mutual funds to get a return of around 5 to 7 percent. But, nothing beats real estate investment! When you are investing in the stock market, you have little to no control over the outcome. However, real estate investment gives you the luxury of control and independence that no other investment opportunity offers.
Real estate investment allows investors to generate passive income. Passive income is the income you receive without having to do nothing. Investing in real estate will create passive income for you in several forms.
Generate a Steady Cash Flow!
The rental property that you invested in will not only create a passive income for you but also pay for itself. If your monthly rent is higher than your mortgage payments, then you are likely to generate steady cash flow while building a real estate portfolio to your name.
Create Instant Equity!
The housing market is a cut-throat business. It can be very expensive and very competitive. However, if you get lucky and buy a property for a lesser rate or below market value, you can get that property appraised, after a few weeks, at a higher rate than what you bought for. This will get you instant equity. Moreover, you can sell your property at a higher rate to get your returns quicker or maybe hold onto your property and get even higher returns.
Value Appreciation!
It is important to do your research before you go out hunting for the property you want to invest in. Make sure that the property you choose has the potential to grow. Look for investors who have invested in that market to make sure the market trend is on the right track. If you invest wisely and have done the required research, you can enjoy favorable returns on your property without having to do anything through property appreciation.
It is a proven fact that the longer you hold onto on a property, the more money it will generate for you. The housing market has always been able to recover from any dip in the trend that might cause depreciation. It has been seen that those who had held onto their properties during tough times have managed to get heavy returns as a result of their perseverance. These days, the real estate market is booming, and appreciation is back on track.
Pay Down the Loan Principal with Ease!
One of the best features of investing in real estate is that you can pay down the loan principal from the cash flow generated from your tenants. The loan principal accounts for around 80% of the total value in regular loans. There is no other investment opportunity that offers values as high as real estate at such a low rate.
Tax Breaks and Write-Offs!
In the world of real estate investments, there are quite a few opportunities to get tax write-offs and tax breaks you can benefit from. For example, you can tax write-offs for property management, mortgage interest, and maintenance. You can trade an investment property for another through the 1031 Exchange. You can do all of that while avoiding taxes on the income of this sale.
Real estate investment is one of the safest forms of investment in any financial situation. With its unique tax benefits, real estate investment can provide investors with heavy returns on their investments with minimal risks.
Portfolio Diversification!
If you are looking to amass wealth and create a sustainable cash flow, then you have to diversify your portfolio. Real estate investment provides just that! When you decide to diversify your portfolio, you automatically spread your risks. Real estate can and will serve as a safe and tangible asset to alleviate any risks to your investment.
Many millionaires in the world have amassed almost all of their wealth through portfolio diversification and real estate investment.
If You Invest Passively, You Won’t Have to Deal with Tenants and Their Complaints!
When you are looking to invest in real estate but do not have the temperament of dealing with the day-to-day complaints of tenants nagging day in and day out about a leaky faucet of noisy neighbors, passive investments allow you to share ownership with other investors. You are awarded your share of the profits without dealing with the property maintenance and tenant complaints.
You Won’t Have to Deal with The Bank If You Invest Passively!
Another benefit of passively investing in real estate is that you won’t have to deal with the bank. In the current economy, banks require detailed documentation and guarantees when processing loans. This process is both time-consuming and mind-numbing.
The passive investment allows you to deal directly with a real estate investment company that already has strong relationships with banks and can deal with the bank on your behalf.
Opportunity to Learn from Someone Else’s Mistakes!
You can always take your money and have a go at real estate investment on your own. But, why jump in deep waters without learning how to swim! The passive investment allows you to learn and gain experience on someone else’s behalf. It offers an opportunity for new investors to learn the ropes of real estate investment from a safe distance.
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