Advantages of Investing in Real Estate
Investing in Real Estate, Though many people own real estate in the form of their personal home, real estate can also make a profitable investment vehicle. While real estate has risks like all other investments, real estate offers an investor a lot of different advantages over stocks and other similar investments.
Depreciation is a tax process that allows you to deduct the amount of depreciation a property experiences each year. In the case of real estate, you can depreciate the loss of value of the home or other structure each year but you cannot depreciate the land. For most real estate properties, the amount of depreciation that you can claim will create considerable tax savings. If you use your investment property as a rental, you can deduct the costs you incur renting the property or the fees paid to a real estate management company. You can also deduct repair and maintenance costs for rental real estate. If you borrow money to buy real estate, you can deduct the amount of interest that you pay on the loan.
Multiple Income Opportunities
An investment in real estate can create a profit in different ways. In the case of a rental, you will create a stream of income from the rent you collect on the property. While the real estate market fluctuates, over the course of time real estate generally increases in value. This increase in value will also help to create a profit when the property is sold. The tax breaks noted above will also help to create a profit on your investment.
Inflation is a concern for many investors. Inflation erodes the value of money, making an investment worth less and less as time passes. While in some situations the real estate market can be harmed by the economic factors that accompany inflation, real estate prices generally climb at a rate above the rate of inflation. This helps to protect a real estate investor from losing money due to inflation.
A real estate investment is a tangible asset that you can see and touch. While the value of stocks can be artificially inflated and people can steal from a brokerage account, real estate is relatively safe from fraudulent schemes. Real estate is also a finite resource. While unlimited competitors can enter the market and compete against any given company and cause the value of its stock to decline, there is only so much real estate to compete against your investment.