Are you considering whether to start investing in real estate?
If so, you aren’t alone! One in three Americans prefers to invest in real estate over the long-term instead of other options.
Unlike buying shares of stock, bonds or exchange-traded funds (ETF’s), each piece of real estate is a unique product because of its size and location.
Investing in real estate can be a stressful decision but there are many compelling reasons to begin putting your money into the market now.
You may be asking, ‘Why should I invest in real estate?’
Read on to learn 5 reasons to invest in real estate in 2020!
1. Future Appreciation
Your real estate investment can appreciate far more than the average stock or bond investment.
Since 1968, real estate has had an average appreciation rate each year of 5.4 percent.
This average annual return includes the economic downturn in the 1980s and the financial crisis that took place in 2008 and 2009.
Although there’s never a guaranteed return with an investment, you can be confident that real estate investing can yield a positive return over time.
2. Leverage Value
You can leverage the value of the real estate you own so that you can borrow money to fund future purchases or improvements on the property.
As you build equity in the property you buy, that is taken into account by a bank when they are deciding whether to loan you money.
When you have a current mortgage on multiple pieces of property or own them outright, you show a bank that you are a responsible person with your finances.
That can make the difference between qualifying for a loan or having to look elsewhere for a funding source.
3. Improvement Potential
A major benefit of real estate is that once you buy it, you can begin making improvements to it that increase its value.
Stocks and bonds are a plain asset with no improvement potential. It’s a purely financial transaction that appreciates as a company increases revenues and improves shareholder wealth.
When you purchase a piece of property, you can make changes to it and develop it to help increase its value.
4. Valuable Tax Implications
Owning a piece of real estate will also give you a valuable opportunity to improve your tax status.
Buying or selling a piece of property that you hold for a year or less causes you to insure capital gain taxes. However, these tax rates are only 15 to 20 percent of your gains at the federal level.
Beyond those benefits, you can take advantage of certain federal tax deductions during ownership such as property upkeep and maintenance costs.
5. Build Equity
You can build valuable equity in real estate over the time of your ownership.
Equity is calculated by subtracting the amount you owe on a property from the value of that piece of property.
When you develop a piece of real estate or build on it, you can choose to rent it out to a person or business for use. This can enable you to offset the cost of your mortgage by receiving rental income each month from that tenant.
Why Should I Invest in Real Estate?
When asking, ‘Why should I invest in real estate?’ there are many different answers why.
Before you begin investing in real estate, take time to consider your financial position and what you can afford to buy. Depending on the market for the piece(s) of property you buy, you may have to hold onto it for an extended period to realize a gain on it.
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