SA Properties: Benefits of having a real estate investment
Are you thinking about investing in a house or a real property? As long as you do it right, a house is one of the best investments you can have with your money. It can be a passive income and even be a career for you. Aside from that, there are many other benefits of having a real estate property.
Learn more about the various benefits of investing in real estate, features you should look for when buying a property as well as ways of investing in real estate by reading on:
Benefits of investing in real estate
The goal of many real estate investors is to attain a financial position where they do not have to work anymore since their properties can fund their lifestyle. This is why more and more people are getting engaged in investing in real estate. Check out more of the key benefits of investing in real estate below:
Builds equity for the future
You build up equity as you pay your mortgage loan since your property’s value rises which you can cash in on in the future. With the use of your equity, you can have the ability to buy more properties and increase your cash flow even more.
Provides passive income
One of the lucrative ways to use your real estate is to convert it into a rental property that could provide you with stable passive income that requires only a minimal amount of effort to maintain. It can be a great option for those who look to make money on the side or want to secure their financial future once they retire.
Also, renting out properties can give you peace of mind since you know it is being kept by your tenants. It will not be left open for possible vandalism and squatters, thus property issues and damages will not be a problem. The funds you get from renting out your property can be used to pay your house loan and other expenses.
Even if rents tend to increase as time passes, your main costs such as your mortgage payment will stay the same. Thus, your cash flow will continue to increase as time goes by.
Protects you from inflation
Investing in real estate can offer you security against inflation since as prices rise, the cash flow you get from your investment rises too. Most real estate investors make money through rentals and since the real estate values increase over time, they can get a big profit once they decide to sell their property.
If you decide to rent out your property, as home prices rise in the market, so do your rentals. In short, you are keeping pace with inflation and there is a little risk of losing profits. Thus, real estate can get a hedge against inflation by passing some of its pressure on your tenants or in the form of capital gains.
Offers regular cash flow
Real estate provides regular and reliable cash flow, especially if you have rental properties. Your cash flow is the net income you get from your real estate investment after your mortgage payments and operating expenses have been deducted. Most of the time, your cash flow increases as you pay down your mortgage and build your equity.
If you have a separate job, you can use the extra cash you earn from your investment to buy more properties and expand your portfolio. This can even lead you to a bigger income compared to what you are earning in your current job.
Investing in real estate is also one of the best ways to supplement your income once you have retired. You do not have to worry about managing a daunting business since all you have to do is to wait for the equity to build or for your tenants to pay rent.
Impacts your community
Once you invest, you can provide help to those who are looking for housing, increase the tax revenue of your city or town, support your local economy and so on. The more your community grows, the more your real estates appreciate so it is a cycle that can help you build wealth while creating a positive impact on your area.
Expands your portfolio
If you are not new to investing, you might have already invested in stocks, bonds and other securities. Adding real estate to your portfolio is a good way to expand it and mitigate risk. This means it can lessen your portfolio volatility and provide a possible higher return.
Since you are growing your funds across various investments, you can offset losses more efficiently in case they occur. In other words, you will be able to stand amidst market swings, getting more profits as a result.
Gives valuable tax advantages
You can get many tax benefits if you invest in real estate. Depending on how you use your real estate investment, some of your costs can become deductible business expenses such as your mortgage interest, income tax and many others. These benefits can help you save more money and let you deduct some costs of owning, operating and managing your real estate.
Gives you the upper hand
Owning real estate gives you the upper hand on what you are going to do with it. For instance, if you want to rent it out it is up to you how much you will charge in rent and how you will manage the property while renting it out. You can even use rental services such as Airbnb to convert your property into a place for short term vacation rentals.
What to look for when buying a real estate property
If you decide to look for a real estate property to invest in, you must know what will boost your chances of getting an excellent property. Getting an excellent property means drawing more tenants to occupy it. Below are some of the features you should consider when looking for a rental property:
Your location can impact the quality of the tenant and the size of the revenue you can get. A great tenant is willing to pay bigger rent if there are desirable aspects to the rental unit such as its location. Find a property that can easily access schools, grocery stores, parks and business centres. No one likes to waste fuel on long drives or spend long hours on a commute so a great location is a key feature you should look for.
People want to rent a property that is close to various modes of transport and major highways as much as possible. Most reasons why people rent are to get closer to their work so they prefer access to routes that can easily and quickly get them to work.
Ways to invest in real estate
There are three common ways to invest in real estate: buy and hold, rehab and wholesale. If you do not know what to do with your property, read on below to give you an idea of how you can use your real estate to the fullest:
Buy and hold
The concept of buy and hold strategy in real estate investment is simple. Here, you will find a way to increase the value of your property by renting it out and collecting monthly cash flow until it can be sold at the appropriate time. Doing this can increase your equity while paying down your mortgage obligations with the help mostly of your tenant’s money.
Rehabbing, also known as house flipping, is one of the most lucrative real estate investment strategies but it requires time and attention to detail to successfully earn from it. This strategy is when a real estate investor renovates a property to improve its quality and value in hopes of reselling it to a higher price.
Putting up your real estate investments for wholesale comes with less risk and upfront costs compared to other methods. But profits on wholesales are not as large as what rehabbing as well as buying and holding can offer.
A wholesale deal revolves around the idea of a real estate investor serving as the middleman between a seller and buyer. The goal is to get the right to buy the property through a binding contract then selling the rights for an ‘assignment fee’.
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