Why You Should Invest in Real Estate Now for Long-Term Gain – Real estate refers to property consisting of land and natural resources or permanent improvements attached to the land. Real estate is predictable compared to investors who rely on the stock market, which could fluctuate at any time. The following presents some of the reasons why you should invest in real estate:
Real estate has a stable cash flow. Cash flow refers to the income left over after all the mortgage payments and operating expenses have been made. Since more people are expected to rent in the future, you can set the rent to cover the cost of the mortgage payments and operating expenses and still leaves you with a reasonable amount. You should also consider the current market rates and avoid overcharging above the normal and losing renters.
Appreciation can be described as the increase in the value of property over time. According to the National Association of Realtors, real estate has been appreciating at a six percent rate per year even during the financial crisis of 2007 to 2008. As time goes on, the property increases in value, causing the rent also to increase. This enables you to keep up with the risk of inflation. If you decide to sell the property in the long run, the selling price will be much higher than the buying price, and you will profit.
Renting out property is a form of passive income. Fewer people are buying homes while more are renting, which means many people will be looking to rent in the future. Passive income refers to money that flows at regular intervals without putting in much effort to generate it. When purchasing real estate initially, the cash flow is lower, and the mortgage payment is high. As time passes, the mortgage is eventually paid off, and the cash flow increases. In a way, this can be referred to as a savings program that yields more as time goes by. This passive income will cushion you should you lose your job unexpectedly or even when it reaches your time for retirement.
Depreciation is the loss in value of property or equipment over time. Though, in reality, the value of the property appreciates, the depreciation deduction allows you to obtain higher positive cash flows even after reporting lower income for taxation purposes. This is because the rent goes up even if the property depreciates, thus generating a higher return.
To invest in real estate is a self-sustaining asset, and you should invest because of the high returns. Young adults now prefer renting than buying homes compared to fifty years ago, possibly because of the student loans that burden them. If you invest in real estate right now, you will be able to rent out to people in the future and enjoy passive income indefinitely.
For more information on getting started investing in real estate in Snohomish County, start here by contacting me today.
More Information for Local Residents
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- 10 Ways Homeowners ‘Trick’ Buyers in the Inspection
- 5 Things to Know About Buying a Historic Home
- The Importance of a Home Warranty
- What to know about the first year of homeownership
- How to Make an Offer on an REO Property
- 5 Things Not to Do Once Pre-approved for a Home Loan