Why Should You Invest in Real Estate? Check Out These 10 Reasons

Real estate investments have been popular in the United States nowadays. In a 2015 survey conducted by Bankrate.com to 1,000 investors, they have found out that 27% of American investors prefer investing in real estate instead of cash and the stock market.

According to these investors, the tangible nature of real estate offers them more security and stability than the intangible nature of stocks and bonds.

Here are the ten reasons why you should invest in real estate:

Value Appreciation

The value of real estate properties will increase over time. The data of National Association of Realtors shows that there is a 6.4% average yearly increase of home rates from 1968 to 2004, without single decline throughout the duration.

Tangible Investment

Real estate is a tangible investment – something you can see and touch. Unlike shares and bonds, you can feel more secured with real investments. You can sell these properties, build a house or develop it into a commercial property.

Inheritable Wealth

If you have children, real estate properties are great assets that you can pass on to them. It is a treasure that grows in value over time. Your children can definitely benefit from these real estate properties in the future.

Leverage

Investors can also have greater borrowing power when using the property as security rather than using a share portfolio. Real estate owners can leverage to increase returns and build more wealth. However, an investor should understand the risk of leveraging and how it may impact their investments.

Equity Amortization

One of the greatest advantages of investing in real estate is that the equity of the properties will continue to rise. If you pay the home monthly, then you will also build equity in the home every month. If you have decided to sell the home, you will take more profits.

Loan Collateral

Real estate properties are great collaterals for loan applications. With real estate, you can be able to increase your principal loan. You will have greater borrowing power.

Income Source

Basically, if you own real estate properties, you can be able to develop them into apartments, commercial properties and so on. These will be great sources of income. House for rent and commercial units are in-demand.

Inflation-Proof

The rates of rents can escalate while the mortgage payments on properties remain stable. This will allow you better cash flow as there is no rise in expense for holding a property. Moreover, when the inflation increases, there will be more demand for renters.

Low-Interest Rates

Lenders are most likely to lend money to borrowers with real estate properties thank any other assets. They will lend a higher percentage of value, as high as 95% and with the lower interest rates than any other assets.

Tax Benefits

Real estate properties also benefit from capital gains tax. If you sell your home, you are no longer needed to pay any tax on the profit. Also, if you sell an investment property, you will only pay the capital gains tax on half of the profit.

These are just a few of the many reasons why you should invest in real estate.

6 Common Types of Real Estate Investments

Many people now are engaging in real estate investments. Apart from the fact that it is a tangible asset, owning a real estate property expands your sources of income. Plus, its value increases over time.

Here are the six types of real estate investments that you can make:

Residential Real Estate Investments

Residential real estate properties involve houses, apartments, inns and motels, townhouses and vacation houses. A person or family can rent one of these to live or stay. The rate of the rental depends on the length of their stay and the rental agreements.

Commercial Real Estate Investments

Commercial real estate properties include office buildings and skyscrapers. As an investor, you would allow small and large businesses to rent or use your property as their office or outlet. The rate depends on the agreement while the payment usually takes place every month.

Industrial Real Estate Investments

Industrial real estate properties include warehouses and other industrial facilities which can be leased to businesses and companies. These properties can be used as distribution centers, storage units, and other special purposes. You can also integrate maintenance services to increase returns of investments.

Retail Real Estate Investments

The common form of retail real estate properties is a shopping mall. Malls lease spaces to businesses. This includes food shops, dress outlets, jewelry shop and much more. Apart from the base rent, the landlord also enjoys a share of the sales generated by the tenant store.

Mixed-Use Real Estate Investments

Mixed-use real estate properties combine any of the preceding categories. For example, a university established a building that has classrooms, at the same time commercial and retail units for lease. The first half of the building contains classrooms for students, while the other half, which faces the outside of the campus has bank outlets, food stores and other businesses leasing.

Real Estate Investment Trusts

Lastly, you can invest in Real Estate Investment Trusts or REITs. Basically, you are buying shares of an investor or corporation that owns real estate properties. You will receive a dividend out from the income. Of course, you also have to deal with taxes.

What among these real estate investments do you want to start?