Diversified investors have precious metals, stocks, bonds, cash, various types of real estate, and more in their portfolio. But if you are an investor and don’t own investment property, we want to share 6 top reasons you should invest in real estate.
To accomplish this task, we want to share an article in Entrepreneur by Grant Cardone, while also sharing our experiences as a real estate wholesaler in Tampa Bay, Florida.
#1 Positive Cash Flow
The cash flow generated by rental properties is perhaps the most significant reason to invest in real estate. Also, the quick profits generated by flips, which can also generate regular inflows of cash, is another reason many investors buy real estate.
A good rental property generates enough cash flow to pay all expenses, including financing of the property, while also generating monthly profits.
In essence, real estate investors make money with other people’s money, because rental properties generate the cash flow to pay for themselves while also generating profits.
Leverage is simply using a loan or other form of money, as opposed to cash, to buy a property. Buying an investment property with a mortgage or hard money is a good example of using leverage.
Though there is an ongoing debate among investors whether it’s better to pay cash or use leverage to purchase rental properties, two of the positive reasons to use leverage are:
- Higher returns: Leveraged properties typically have a higher cash-on-cash return, because the investor puts down a small percentage of the purchase price and finances the rest. Leverage also enables investors to purchase more properties, while also taking advantage of tax benefits of leveraged properties, resulting in higher profits.
- Lower risk: Leveraged properties have lower risk for the investor, because the risk is shared with the party loaning money for the purchase of the property.
#3 Hedge Against Inflation
Owning real estate is one of the best ways to protect yourself from the adverse effects of inflation, because it’s one of the few assets that reacts proportionately to inflation. That’s because home values and rents go up, as inflation occurs.
#4 Profit From Owning Hard Assets
Real estate investors own a hard asset that has value, in addition to receiving cash flow profits generated by the asset.
As we discussed when talking about cash flow, real estate investors make money with other people’s money. The cash generated from rents pays all expenses, including financing, thereby paying for the purchase and upkeep of the property while also generating monthly profits.
Eventually, the property is owned by the investor free and clear, and he can sell it for a profit. The investor, therefore, profits from owning a hard asset that was paid for with other people’s money.
#5 Tax Advantages
There are numerous tax benefits of owning investment real estate, especially when living in a state like Florida that has tax benefits for investors.
Real estate investors can write off expenses relating to their business, like any other business owner. But be careful to consult your accountant, especially when it comes to repairs, improvements, and sale of the property.
#6 Increase the Value of Your Assets
As a hard asset, real estate tends to increase in value. Inflation is part of the equation over time, but real estate investors also have the ability to improve their properties, and increase value with forced appreciation.
Multifamily investment properties, in particular, offer great options for forcing appreciation, often at a lower overall cost per tenant than single-family homes.
To continue your research on reasons to invest in real estate, we recommend 8 Ways Real Estate is Your Smartest Investment.
Graystone Investment Group
Graystone Investment Group is a real estate wholesaler of single-family and multifamily investment property. We have researched the Tampa Bay area neighborhood-by-neighborhood to determine where investments are likely to have the most most return on capital.
Unlike other wholesaling groups, we find properties that we resell to investors at discount prices, while also connecting them with private financing. We also coordinate with rehab and management companies we’ve worked with for years, at no extra charge.