When contemplating investments to put money into as an alternative to buying stocks or in setting up a small business, real estate emerges as the better option. Here, the moneymaking opportunities do not require active involvement by trading, or staying on top of day-to-day operations. It can be a lone-person business venture as it does not require keeping people on a regular payroll. Moreover, it’s not as vulnerable to price fluctuations, the way stocks and financial market products are impacted.
Although acquiring, owning and maintaining real property is not hassle-free. it’s an investment option that offers well-established advantages. The benefits can more than make up for the occasional hiccups that can be prevented by way of proper management.
Real Estate Offers Better Leverage
Unlike ownership of shares of stocks or of a small business, a real property gives its owner better leverage when looking to borrow money in financing its purchase. Let’s say you’re interested in buying a property with noteworthy amenities. It’s selling at a price tag of $150K, which you can acquire by paying an initial 30% downpayment of $45K.
You can pay for the $105K difference by taking a bank loan, using the property as collateral. Although you will be paying interests on the real estate mortgage, you can add improvements that will enable you to earn extra income from the property, and use it in paying the monthly loan amortizations.
The Right Property is Guaranteed to Appreciate in Value Over Time
While the property may not be an immediate source of lucrative income, the value of the money you invested is guaranteed to increase overtime. Generally, the value of real properties in good locations appreciate with the passing of time.
Offers Opportunities to Increase Your Cash Flow
Buying the right piece of property that you can rent out to the right renters can help increase your cashflow. If you’re not using the money to pay off a mortgage loan, you can set aside money to use in buying another real estate investment. After all, having more units capable of generating cash revenues will boost your cash flow at a more comfortable level.
Estate-Related Business Expenses Incurred are Tax Deductible Items
While you can take out a loan to fully pay for the entire value of a real property, you can also include the interest you paid on the loan during the year as a tax deductible for the income generated in the same year. All property-related expenses such as insurance, repairs, maintenance, utility costs, real estate taxes, upgrades and advertisements incurred in the same year a taxable income is reported, can be recognized as a tax deductible item.