Investing in real estate has always been a great investment whether for business purposes or residential housing. It has been proven by financial and economic professionals for centuries, and it gives you the least risky investment to help diversify your portfolio.
There are several critical elements that financial and investment advisors often consider essential to gain a great return any investment. On average most investments, like savings accounts, mutual funds and stocks will only give you a couple of these critical elements, but investing in real estate gives you all five.
The often considered critical elements for the best success of getting the fastest and greatest return on your investment are appreciation, leveraging other people’s money, cash flow, taxation benefits and building equity or paying off principle. These elements are all inherent and ample when you are investing in real estate.
Leverage Other People’s Money
When you are Investing in real estate, the most common way to do this is using other people’s money. You often times get mortgages and pay monthly payments towards interest and principle. This is the most profound way of using OPM because let’s face it; you will never be able to buy stocks or mutual funds this way.
When you purchase real estate as an investment using OPM the element of building equity or paying down the principle is already a part of the process. As you pay down the principle, you are essentially building your wealth and adding a great asset to diversify your investment portfolio.
When you purchase multiple houses or buildings to rent out, it makes your cash flow increase. What cash flow ultimately means is the money you have left from collected rent after all expenses paid and the more rent money you collect, the larger your cash flow becomes making investing in real estate an extensive cash flow monster.
If you own more than one rental property or more than one home or office building the United States Federal Government allows you to deduct a portion of each properties value or depreciation out of your income. Investing in real estate is also not considered taxable as self-employment income thus reducing your taxation burdens even further.
Appreciation is Paramount
For investing in real estate to pay off one must consider it for the long term. As we have seen in the past, the housing market fluctuates, but not as much as the stock market or gold prices. If you stick with your real estate investments eventually the appreciation increases while you stay protected from inflation and the waves of quantitative easing.
Investing in real estate is a great way to diversify your portfolio and gain numerous benefits. The five critical elements that all financial and investment advisors say helps build wealth and gives you the best ROI are all part of investing in real estate naturally.