When the recession hit and the housing market started to decline, a lot of investors abandoned the real estate world and started investing in other industries. While relatively slow for the time being, the real estate industry has started to recover and attract old and new investors.
When investing in real estate, if you cannot pay for the property with cash, it is very important to have access to a lender that will accommodate your needs and budget. Knowing people in the real estate industry, such as agents, appraisers, and even home improvement companies can give you the upper hand over other investors. Also, researching the property that you are about to invest in is an important aspect of being a successful real estate investor.
Advantages of Investing in Real Estate Property
Depending on the housing market and many other variables, investing in real estate can be a very profitable business. Here are some of the advantages that you will have:
1. Profit. Finding a home priced low enough and realizing its potential can result in some big profits. Buying a home that is in foreclosure, close to being foreclosed on, or in need of repairs or improvement, is a great opportunity for making a profit. You can buy this home for much lower than market value, repair or improve it, and then sell it for a higher price, netting you a nice profit. Also, renting one or multiple homes that you have purchased will result in ongoing income.
2. Lower taxes. Buying a home will allow you to deduct many expenses, such as the mortgage interest, property taxes, insurance, repairs, and even profit that you make from selling the property.
3. Using leverage. Purchasing a home and increasing its equity without spending your own money is an important part of being successful in real estate investing. High equity will help you save on the mortgage while making profit.
4. Appreciation. Your property can increase in value over time depending on factors such as supply and demand or inflation. Small improvements or repairs can also influence the selling price of your investment significantly.
Real Estate vs. Other Investments
Real estate seems to be the best choice when considering investing your money. The world economy is slowly recovering, but its fluctuations have a big effect on other possible investments, such as gold or stocks. Owning a home has some clear advantages that were enumerated above, besides being a good investment. Besides those advantages, home prices and current mortgage interest rates are very low right now and probably won’t go lower, but will start to increase soon. Other advantages to owning a home instead of other investments are:
- Having more control over your investment. A home gives you more control than, for example, stocks. With stocks, you depend on big corporations and executives, who don’t make decisions based on your financial situation. If you have a home or apartment that is not being rented, you can always lower the rent, or create other incentives to attract renters.
- More options. Whether you need some fast cash or passive income, there is a real estate investment that can accommodate you. With stocks or gold, for example, you don’t have many options besides buying or selling.
- A tangible asset. A home can be rented, sold, or you can live in it. You own the property or the land, and this can give you a lot of peace of mind. Being defrauded in real estate is much harder than in stocks, because you can visually inspect the property or talk to the tenants face to face.
Every investment has pros and cons, but it seems that real estate is the one that offers you the most control, stability and options. But, like all investments, investing in real estate highly depends on your knowledge and financial situation.