Greg Rutolo | Loan Factory

Greg Rutolo | Loan Officer | Loan Factory

An investment property is the cornerstone of many millionaire portfolios.  Residential real estate has proven to be successful way to generate wealth over the long term.

There are many benefits of investing in a real estate portfolio.  Here are nine benefits of investing in real estate.

Generate Rental Income

Earning rental income is one of the most important advantages of owning an investment property.   Initially, the revenue produced from the rental property can help offset a mortgage payment, property taxes, and property insurance.  Over time, property taxes and other expenses will increase.  Rents will increase overtime as well.  Historically, rent increases have outpaced inflation rates.  Rents can be used to pay a mortgage, until the property is owned free and clear.  At that point, the property generates free cash-flow.  Often, this is an excellent strategy for retirement.

Create Equity

With each mortgage payment you make after buying a property, you increase your equity. This equity can eventually be used to finance extra investment opportunities. It can also completely pay off the mortgage on your investment property. Also, equity can act as a buffer against market swings, increasing your financial stability.

Tax Advantages

The potential tax advantages of investing in real estate are another incentive. Real estate investors can deduct a variety of expenses.  Mortgage interest, property taxes, and upkeep charges can typically be deducted. These write-offs lower your taxable income and improve your cash flow.  Always consult your tax advisor about any deductions and write-offs.

Property Appreciation

Real estate is a desirable long-term investment.  Historically property values to increase over time. In many markets these increases have far outpaced inflation.  An investor an take advantage of the increasing equity the property.   With a cash-out refinance, an investor can borrower against one property to buy another.  Many investors will use this refinance technique to continually buy properties and build long term wealth.

Portfolio Diversification

Investing in property can also offer diversification to your investment portfolio. If you’re heavily invested in stocks or other investments, adding a property to your portfolio can reduce your risk. Real estate tends to act differently than other asset classes, which can help protect your portfolio from market downturns.

Inflation Protection

Real estate is also considered a good hedge against inflation. As the cost of living increases, so do rents, which means your rental income can keep pace with inflation. Property values tend to outpace inflation.  Inflation protection helps build wealth over the long term.

Opportunity for Renovations and Upgrades

Investing in property provides you with the opportunity to renovate and upgrade the property.  A renovation or upgrade can help to increase property value. Improvements to the property, can help attract higher-paying tenants and increase your rental income. The upgrades to the property that can help it appreciate in value over time.

Leverage

Real estate investing allows for leverage, which means you can use other people’s money to buy property. With a mortgage, you can buy a property with a down payment and finance the rest. This method lets you start in real estate investing with less capital. You would need more capital for other types of investments.

Pride of Ownership

Finally, investing in property can offer a sense of pride of ownership. When you own an investment property, you have a tangible asset that you can see and touch. You have control over its maintenance and management, and you can take pride in the income it generates. Owning a property can also give a sense of stability and security, which can be important for long-term financial planning.