There’s no doubt that real estate is a key part of any well-diversified investment portfolio. But why is that? What makes real estate such a strong investment? In this post, we’ll look at some of the reasons why real estate should be a core part of your investment strategy. Stay tuned!
1. The stability of the real estate market
The first reason to consider real estate as a core part of your investment portfolio is the stability of the market. Unlike stocks and other investments, which can be volatile and subject to sudden changes in value, real estate is a much more stable investment over time. The value of real estate tends to increase gradually over time (many years), providing a solid and predictable return on investment.
2. The potential for income generation
Another reason to invest in real estate is the potential for income generation. If you purchase an income-producing property, such as a rental property, you can generate ongoing income from rent payments. This additional income can help to boost your overall investment returns. You can hold on to the rental property and allow your tenants to pay off your mortgage for you!
3. The tax benefits
Finally, another compelling reason to invest in real estate is the favorable tax treatment that is often available. In many cases, you can deduct expenses related to your investment property, such as property improvement expenses, property taxes, and depreciation. This can help to reduce your overall tax liability and increase your net return on investment.
If you need help discovering the tax benefits of real estate, don’t hesitate to contact a tax professional to help you. Many provide free consultations, and can end up saving you a ton of headaches.
4. The generally low risk of real estate investments
Investing in real estate also has the advantage of being a relatively low-risk investment. Unlike stocks and other investments, which can lose value rapidly, real estate values tend to appreciate slowly over time. Market corrections in real estate tend to be much less volatile than the stock market. Additionally, you can use your rental income to offset the expenses of ownership. This makes it an ideal investment for those who want to protect their capital while still earning a return on their investment.
5. How to get started in real estate investing
If you’re interested in adding real estate to your investment portfolio, there are a few things you need to do to get started.
First, you’ll need to educate yourself on the basics of real estate investing. This includes learning about the different types of properties, the process of purchasing and financing a property, and the legal considerations involved in owning and operating a rental property.
Once you have a good understanding of the basics, you’ll need to find a good real estate agent who can help you find properties that fit your investment criteria. You’ll also need to obtain financing for your investment property. There are a number of different financing options available for real estate investors, so be sure to shop around and compare rates and terms before choosing a lender.
Finally, you’ll need to develop a property management plan. This plan should include everything from setting rental rates and collecting rent to handling repairs and maintenance issues. Having a solid property management plan in place will help you maximize your investment return and minimize your stress level.
With these tips in mind, you’re well on your way to becoming a successful real estate investor. Just remember to do your homework, work with an experienced agent, and have a solid property management plan in place, and you’ll be well on your way to reaping the rewards of real estate investing.
Erika Finn, founder of Stacking Acorns, is an attorney who graduated from law school at University of California, Berkeley. She was a member and editor of the California Law Review and won the Prosser Prize for Legal Accounting. She holds a Master’s Degree from the University of Southern California (USC) and a Bachelor’s degree from Indiana University- Bloomington. Stacking Acorns is a personal finance website for women by women. We help mid-life women achieve financial freedom through real estate investing and other streams of passive income.