Have you ever watched real estate investment shows like Flip or Flop, Flipping Out, or Property Brothers, and wondered if you should throw your hat in the ring? Do you dream of owning your own home—maybe a fixer-upper? With market fluctuations and threats of financial downturn, you may be wondering if real estate investment is a good idea. These 9 millionaires say a resounding “yes”. Joseph Pingaro has lots of reasons why real estate is one of the best investments you can make.
Real estate is a Tangible Product
When you purchase real estate, you can see it and touch it. You can point to it and say, “I own that”. As long as you do your research and have an experienced advisor on your team, you will know what you are getting into and avoid being scammed. You can inspect your investment and take plenty of steps to ensure you are making the right decision.
With traditional stocks, your investment can disappear overnight, but real estate will stay put through the ups and downs of financial markets. For extra security in your investment, purchase a home to live in while you rehabilitate it. This way, you get use out of your property while preparing to increase your return, and you are not stuck with two housing payments.
Turn Elbow Grease into Profit
When you invest in real estate, you see the results of your own hard work. If you are inexperienced in home repairs, you don’t have to go it alone. Classes offered in person or online will teach you the know-how you need for everything from designing kitchens and bathrooms, to replacing a roof. While kitchen and bathroom design generally produce the highest increase in property value, simple improvements like a fresh paint job or attractive landscaping are a low-cost way to boost curb appeal.
Mortgage Payments Lower Than Rent?
With a fixed-rate mortgage, your monthly cost only changes with tax and insurance fluctuations. Your base mortgage payment stays the same throughout the life of the loan. Even if you just plan to live in your home and not turn a profit, you will save money and have more security with ownership than you would with a rental.
The benefit of a stable mortgage payment also works in your favor if you intend to rent your real estate to tenants. People will always need a place to live, and tenants typically pay more than a monthly mortgage costs. You can raise rent annually; and regardless of how much cash you invested, rent is based on the full value. Theoretically, you can put $3,500 down on a $100k home and charge between $1,000 and $2,000 monthly in rent.
Tax deductions can be significant
You will need the help of a professional accountant, but there are plenty of options and approaches to save money. Depending on your specific situation, you may be able to deduct property taxes and interest paid on mortgages. Under certain circumstances, you can also deduct travel expenses to and from your rental property, repairs you make, and even the tools you use for maintenance.
Options are flexible
With a traditional stock investment, you have two options once you’ve made your purchase: keep or sell; but if you invest in real estate, the possibilities are only limited by your imagination and local laws. You can live in the home you purchase or quickly rehab and flip it, or both.
People looking for a longer-term, more constant source of income, typically rent their property out to tenants. Another long or short-term option is to turn your property into an Airbnb. Rent out your entire home or just a bedroom. Average Airbnb home rentals are about the same price per night as local hotels. If none of that sounds good to you, look into local zoning laws and repurpose the building for something else entirely.
Real estate investment has a higher return than savings
The best high-yield savings accounts earn just under 2.5%. If you save $100k, you will only earn $2,500 or less per year. If you have some extra cash on hand and play your cards right, the return can be much higher with real estate.
If you purchase a $100k home, you don’t have to invest the whole sum at once, and you generally don’t have to do anything but rent your property out, in order to get all the money you invested back within a year.
Depending on the market, returns can be even higher than that. Especially if you decide to rehab and flip your home. Some renovations are more profitable than others, but you can use your own labor to maximize your investment.
Any Sort of Investment Holds Inherent Risks
Investing in real estate can minimize those risks and maximize return. In order to be successful in real estate investment, you must have the patience to avoid emotional decisions, do sufficient research, and enlist the help of an expert in the field. A seasoned real estate investor can help you make careful choices based on experience and expertise in market analysis. They will use their knowledge to help you make confident, informed decisions, so you can get the most bang for your buck.