Many people with extra cash look for opportunities to grow it over time. There are many investment options available; including stock market, real estate, crypto currencies, gold, etc. Each option comes with benefits and drawbacks. As an investor your goal should be to weigh the pros and cons of each option, and consider the option that best fits your needs. You should also make sure to diversify your investment to avoid being locked into a single option. Real estate investment provides an excellent opportunity to park extra cash and earn steady income along with capital appreciation. Below we discuss some of the important benefits of investing in real estate.
- Passive Income – For people who are working full-time, real estate investment provides an excellent opportunity to earn extra income without having to spend significant time and effort. There are many types of real estate investment opportunities that can provide extra passive income. Some of the options include commercial property, residential apartment buildings, warehouse, etc. You can also look for vacation properties such as modern ski chalets for sale, that provide an excellent option to rent out to the vacationers and earn weekly rents.
- Capital Appreciation – While it is not guaranteed, real estate has typically increased in value over time. If you have longer time horizon, you can expect to sell your property for more value than you bought it for after few years. This is an excellent way to increase your assets without having to spend lot of time and effort.
- Diversification – Majority of people think about stock market when considering investing their extra money. While there is nothing wrong with stock market investment, you should not put all your eggs in one basket, as the saying goes. Real estate provides excellent option to diversify your investment portfolio besides stocks, gold and other opportunities.
- Tax Benefits – Investing real estate provides excellent tax advantages. You can deduct number of expenses associated with real estate against your income thus reducing your tax bill. Some of the expenses you can deduct include property taxes, maintenance cost, insurance, property management fees, mortgage interest, etc. In addition, when you sell your real estate property the gain on your investment is taxed as capital appreciation as opposed to regular income. Capital gains are typically taxed at a lower rate compared to regular income, which reduces your overall tax bill.
- Leverage – When you purchase a real estate property you typically pay 20-30% as down payment and take out loan from the bank for the remaining amount. On the other hand, you are entitled to all the capital appreciation in the property. This provides significant upside potential while making a small investment in the property.
As you can see, investing in real estate has significant benefits that cannot be achieved with other opportunities. Everyone should have this as part of their overall investment portfolio.
