Posted by By Paul Branton, Director of Investor Services for Home Rental Services
Owning investment property offers many different benefits and has been touted by quite a few financial minds as the very best investment vehicle available. Today, I wanted to share with you just a few of the many reasons why I personally think it’s such a great investment opportunity!
Long-Term Financial Growth:
- Equity: As you pay down the principal of the mortgage, you build equity in the property.
- Appreciation: Real estate has a great history of appreciating in value over the long term.
Tax Benefits:
- Deductions: Owners can deduct certain expenses related to the maintenance and management of the asset.
- Depreciation: You can take advantage of depreciation deductions, which reduce your taxable income.
Leverage:
- Buying real estate allows for leverage, meaning you can acquire an asset with a relatively small amount of your own money by using borrowed funds. (Quite a few great books out there on this topic and for good reason!)
Diversification:
- Investing in real estate can diversify your investment portfolio, balancing risks associated with other assets like stocks, bonds, businesses, guns, gold, art or another one of my favorite investment vehicles… classic cars.
Inflation Hedge:
- Real estate often retains value better than other investments during inflationary periods, as property values and rents generally increase at about the same rate as inflation.
Direct Control:
- You can increase the property’s value and rental income potential through improvements and renovations. (This is known as Forced Appreciation… Which is quite a unique opportunity when it comes to investments.)
Potential for Tax-Free Profits:
- 1031 Exchange: The 1031 exchange allows you to defer paying taxes on capital gains if you reinvest the proceeds from the sale of a rental property into another “like-kind” investment.
As with any investment, it’s critical to perform your due diligence and seek out trustworthy advice to determine if it aligns with your overall goals and risk tolerance. While owning investment property can be a rewarding opportunity, it’s also important to be prepared for the responsibilities involved. Given that this investment means you are dealing with an asset that requires continued maintenance and tenants that require customer service; it isn’t as simple or as passive as some other investment options.
If you’re so inclined, send me a message and let me know what you appreciate most about owning investment property. I’d love to hear from you!
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