Why Real Estate is a Good Investment

Posted by Rick Clarke on Friday, May 25th, 2012 at 10:45am.

Real estate has proven to be a good investment for owners.  Over the years, Real Estate experts and professionals alike have studied the benefits of investing in Real Estate.  Let's look at some of the benefits that were cited.

Ownership

This is the more obvious one.  Owning a property instead of renting, in the long run pays off.  Just think, instead of giving money each month to a landlord that is either using it to pay the mortgage or pocketing it because the property is paid off, you can pay your own mortgage on a property that you own.  Sure that means you don't have anyone to call if something needs to be fixed, though whatever it is you are fixing is also an asset you own.

Return on Investment

Generally speaking, history has proved that property appreciates in value over the years.  Certain fluctuations in the market  and other variables determine how much, though it is said real estate appreciates at a rate of around 4% each year.  This may not seem like a lot, though multiplied over many years, it really adds up.

Equity

The longer you own your property and make your monthly mortgage payments, the more equity you will build.  Your lender will be able to tell you how much equity you currently have in your home.  Once you know how much equity you have, you can apply for a home equity line of credit.  Now say you that that money you got from your home equity line of credit and used it to make home improvements.  You are in turn, adding more value to your home.  This takes us to our next category.

Renovations

Making improvements to the property you buy can also be a great return on investment.  Investors that flip houses know this first hand.  For example, a kitchen renovation may have return $10,000 to $20,000 more on what you paid to do it.  This is just an example.  It's a good idea to check with a Property Appraiser regarding specific renovations and how much value they add.

Taxes

If your real estate is in the form of a rental, the interest you pay on the loan is tax deductible int he US. This provides a great savings on your tax return each year.

Rental

If you buy a piece of property for the purpose of renting it, you will make a monthly return on the investment.  This requires proper research and planning.  You want to make sure that what you are buying property for this purpose, that if need be, you can carry the mortgage until the property is rented.  You will also need to research comparable rentals in the area to see how it compares to your mortgage and taxes.  The goal is to cover your expenses and have extra pocket money each month.  In addition, you own it, so you can then sell this property at a later date and make a profit off of the sale.

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