If you are ready to diversify your investment portfolio, are you considering real estate? It’s generally considered by experts to be among the best investments. Why? In this blog, we’ll explore the top reasons interest and demand for real estate investment remain strong.
Leverage Your Investment
Real estate investments allow you to put down a percentage of the home’s total cost and invest in it. This means you could invest just 10% of the asset’s value upfront and own it. As the years go by and you pay your mortgage down, you will hold more of the investment, boosting your rate of return.
Ability to Force Appreciation
GeekWire said it best, “unlike stocks or bonds, you can force the real estate to appreciate. It sounds weird, but it’s possible. First, know that real estate appreciates naturally. On average, real estate appreciates 3% – 5% a year without you doing anything except maintaining the home. But you can increase the rate of appreciation by making renovations or repairs…some renovations can pay you back as much as 80% – 90% of the money invested.”
As an industry expert, I’ve counseled numerous clients on the best renovations to consider for a strong return. I’m always happy to do the same for you if this is a route you’re planning to take now or in the future.
Real estate investors can leverage many tax-write-offs. Keep in mind that if you own and rent out the home, you are technically running a business as the landlord. This means you can write off expenses like the mortgage interest paid on the loan, origination points you’ve paid on the loan, and maintenance expenses, depreciation (spread out), as well as real estate taxes, homeowner’s insurance, and any applicable HOA dues.
I strongly encourage clients to touch base with their financial/tax advisors prior to filing so they can explain the rules and limitations for these types of write-offs.
Earn Regular Cash Flow
Choosing to rent your property can increase the profits you generate because you will gain rental income in addition to your home’s appreciation. Hiring a professional property management company can be an ideal solution if you’re not keen on finding, screening, and managing tenants for your property.
While no investment is 100% secure, long-term real estate investments are generally regarded as a “safer bet” because investors know they have an appreciating asset. Of course, there may be some ups and downs over time, but housing usually bounces back if you’re patient enough.
Varied Investment Approaches
Another appealing aspect of real estate investment is the varied ways in which you can approach investing:
- Buy a fixer-upper and flip it for a profit
- Take the house-hacking approach: purchase a multiple-unit property and live in one unit while renting the others and using that income to cover the mortgage
- Invest in a Real Estate Investment Trust (REIT)
Passing down real estate is a great way to share your investment with others and continue your legacy when the time comes.
Leverage Equity to Increase Your Portfolio
Once you have significant equity in your home, refinance the mortgage, take out the funds and use it for a down payment on your next property, or another investment you’ve got your eyes on!
As always, I welcome the opportunity to be your guide through the home buying journey in Washington State or a trusted advisor for investment properties anywhere else across the globe. Thanks to our global network, the possibilities are nearly endless to connect you with extraordinary properties anywhere your heart desires.
This blog offers a summary of a more in-depth article, which you can read here.