Real estate is usually a great investment option. It can produce ongoing passive income and can be an excellent long-term investment if the value rises over time. You might even use it as a part of your altogether strategy to start building wealth.
Though, you need to make sure you are ready to begin investing in real estate. Firstly, you will need to put down a significant amount of money upfront to begin real estate investing. Purchasing an apartment, home, or piece of land can be costly. That is not to mention the ongoing maintenance costs you will be responsible for, as well as the possibilities for income gaps if you are between renters for a time.
Real Estate Pakistan is still recovering from the recession, but some investors are skeptic about it and asking themselves now: Is real estate an excellent investment opportunity? The answer is, “Yes.” Residential real estate investment still remains one of the financial cornerstones for the middle-class to reap the rewards with minimal investment upfront. Real estate investors also acquire huge financial paybacks. The fact is there are so many benefits associated with real estate that you can immediately increase your net worth when you understand the art of investing in good properties.
Top five Reasons You Should Invest in Real Estate
If you have extra money you want to invest in today’s unsteady economy, then you have to choose investments with a good chance of rising in value over time. Real estate bottomed out a couple of years ago and is on an upward trend in many modern cities. That means it is a perfect time to purchase, while interest rates and prices are low, and costs are assumed to climb in the near future.
1. Better Control over Investment
One problem with bonds or stocks is that you do not have much control over the potential return on investment. In contrast, real estate offers the most leeway to increase the rewards by offering you a little more control and flexibility with your investment. If you want to improve the return on investment, you can, for example, restore older houses and then put them on sale for a more significant market price. Or, if you do not want to restore anything, you can still control how much more you plan to make by offering the property up to tenants. When housing prices rise, many renters are priced out of the market and are forced to rent rather than buy. So, if you want to hold on to the house to gain more investment, you can do it and still generate income by renting it out.
2. Cash Flow
When you invest in bonds or stocks, you have to tie up your money until you sell. Though, a house can offer a way to create cash flow each month when you rent it out. If you have a low mortgage, then you can rent the house out for more than it costs to sustain the mortgage and create immediate monthly income. This will pay off extra costs you might incur while holding the house. If your house does not need additional repairs, you can even reinvest that cash flow to keep the property upgraded since you will continue to create cash flow as long as you own the property.
3. A Tangible Asset
Homes have more value than just paper, unlike bonds and stocks. They are a physical, tangible asset. When the market decreases, the value may go down on paper, but it does not exclude the physical asset. This can still be used to create cash flow, too. Owning a tangible asset enables you to never lose the full value of your home like you can with other types of investments. On the upside, the capacity of housing prices to vary also creates the opportunity for the value of the house to improve over time. Even if the house only rises with the rate of inflation, you can get a three percent or more bump in the price of the home that leads to more significant equity over time.
4. Access to Leverage
When you invest in the real estate sector, there is a good chance you will want to buy many properties to maximize your investment. Real estate offers you the capacity to leverage your investment dollars. Firstly, you will only have to put down between ten and twenty percent just to finance the first property. When the property value increases, your equity rises with it, even though your initial investment does not change. Once you get enough equity, you can also leverage that equity to purchase other homes by getting a line of credit and using the home as collateral. You can take that earning and invest it in additional properties and rent them out or fix them up to sell. One way or the other, you can start with a pretty small investment, but obtain great rewards.
5. Tax Incentives
Primary homeowners can lay claim to the mortgage deduction on their taxes. Though, real estate investors also get their own set of tax incentives when they buy properties to rent out or resell. You could subtract all the expenses required to remodel or rehabilitate a home as capital expenses when you sell the house if you bought the property as an investor to flip it. By subtracting the capital expenses from the income you make off the property, you can balance out the profit you make and pay lesser taxes if any. If you are performing most of the upgrades and purchasing construction equipment to help you, you can also subtract that as a capital expense. Or if you purchase a vehicle to help you get too many properties to fix them up in the course of your property business, this is also deductible. If you plan to hold the property for more than a year, for business purposes, like leasing, you can still deduct the capital expenses connected with the property, but you have to decrease it over a number of years. Residential property expenses linked with a real estate investment have to be depreciated over twenty-seven years.
Add It All Up
When you add it all up, the question “Is real estate a good investment opportunity?” seems like a no-brainer. Of course, it is! There are no such other investments that offer or deliver the same record return on investments with such low initial costs.