As the U.S. economy continues to boom, many economic forecasters expect it to grow by more than 6% this year. This gives investors the opportunity to take advantage of the current real estate boom. Here are six reasons that it is smart to
purchase investment properties.
Diversification of Wealth
Diversification is an extremely important concept for investors. When investors spread their money in different types of investments, they reduce their overall risk from different markets. Following the re-opening of society in a post-pandemic world,
real estate opportunities are likely to expand in unique and high-demand ways, giving way to more varied opportunities with investment properties.
Demand for Rental Properties
According to statistics, homeowners affected by tough market conditions prefer to deal with individual landlords as opposed to investment groups when leasing property. This preference is due to the lax leasing requirements imposed by many landlords. We
certainly see the single-family build-to-rent trend growing as millennials and others rent in desirable areas where their housing preferences aren’t available for them to purchase.
Multiple Financing Options and Low-Interest Rates
Interest rates are at historical lows but won’t stay that way forever. Rates could easily rise by the end of the year, now is the time to buy and lock in a low-interest rate. By delaying, you could be costing yourself a significant amount of money in
the long run. Consider that even a small jump from a 3% to 4% mortgage rate on a $200,000 investment means extra interest over the life of the loan.
Real estate can enhance the risk-and-return profile of an investor’s portfolio, offering competitive risk-adjusted overall returns. Because we’re in the middle of a massive property boom, many investment properties are certain to draw in some truly competitive
returns for their investors, especially if they happen to have a huge degree of population demand.
Tax Breaks and Tax Shelters
One of the major perks of owning real estate is that it offers large tax incentives on everything from rental properties, apartments, industrial, and commercial buildings. Whether you’re an investor or a primary homeowner, there are several tax codes
in place to help those who buy real estate. Mortgage interest and property tax interest can be deducted from gross wages, which helps make owning more affordable than renting. And since an investment property is allowed to be depreciated like equipment
for your business, any improvements made can offset the miscellaneous income earned from rental receipts. For many investors, ownership offers significant tax savings, including tax sheltering. Investors can take their pick of several different tax
break options including deductions, depreciation, passive income, capital gains taxes instead of income taxes, and more.
Creating Net Worth and Assets
Buying and investment properties now give you an asset to sell later. After all, the only things renters are left with once a lease has expired are fond memories.
Building Residual Income
With all of the uncertainty surrounding the stock market, 401 (k)’s, and other investment sources, more and more people are looking for places to invest their money. Investing in real estate now provides a nice nest egg for future use.