Why Invest in Real Estate?
There are many reasons that investing in Real Estate is a wise decision.
Investing in real estate can make a great diversification for investors who hold a high percentage of their net worth in an employer sponsored 401k, stocks/bond investments, or checking and savings accounts.
One of the primary reasons that people invest in the U.S. real estate market is because of the numerous tax benefits that come with it. For example, when you own rental property, you can depreciate that property over the course of the life of the property. On top of that, you can also deduct any business expenses that are incurred in regards to the property. You could also qualify for certain tax credits if you put energy-efficient items into your properties.
Tangible Asset With Value
Owning real estate gives you a tangible asset that should always have some kind of value. With other types of investments such as stocks, you could lose all of the money that you have invested. When you invest in a piece of real estate, even if the real estate market plummets, you should always have some kind of value in your property. This allows you to protect your investment money in something that usually retains most of its value.
Another benefit that comes with investing in real estate is the capital appreciation that comes with it. When you put money into real estate, you buy something that has a definite limited quantity. Only so much land can be bought and sold. As the population continues to increase, this limited real estate will increase in value. This is why over the long-term, real estate tends to increase in value. This gives you profit that you can get on top of the rent that you can collect from the investment property.
You can take advantage of a 1031 exchange if you choose. This is a device that allows you to defer paying capital gains taxes on a piece of property. With this technique, you can sell a piece a real estate and then immediately use the money to buy another piece of similar real estate without incurring any capital gains taxes. By doing this, you can keep trading up to larger properties.