HomebuyingFinancial IQ October 26 2018

3 Reasons to Invest in Real Estate

Increasingly, Americans are choosing to invest in real estate instead of stocks, bonds, or mutual funds. From 2000 to 2016, real estate outperformed the stock market at a ratio of about 2-to-1.[1] For three years in a row, Bankrate found more U.S. adults feel real estate is the best way to invest money not needed for more than 10 years.[2] Still, only about 15 percent of Americans are currently investing in real estate. So why aren’t even more people taking advantage? The same Bankrate survey discovered the most common obstacles to choosing real estate investing are that it's too hard, costly and far out of their expertise. If you find yourself agreeing with those arguments, here are some reasons to reconsider:

Immediate cash flow.

There are many cases of real estate investment in which an investor purchases a property and receives a rent check at the end of the first month. Of course, this isn’t always the case, but even after a mortgage payment, repairs, or paying a property management company, generating a cash flow return is not uncommon.

Tax breaks.

Real estate investments can come with tax deductions on mortgage interest, operating costs, property taxes, insurance, depreciation, and even travel costs to and from your property. Not only will you be sending less money to the IRS, but you’ll automatically be increasing your cash flow.

Equity.

If you make paying off your mortgage a priority, your equity—or the amount of your home that you actually own—will build quickly. Here are some tips to speed the process: Pay more toward your principal. The faster you pay down your home loan, the faster you build equity, even if your home is appreciating slowly. Choose shorter loan terms. When it comes to building equity, a 15-year mortgage is better than a 30-year mortgage. Home improvements. Increasing the value of your home helps narrow the gap between what it’s worth and how much you owe.

Are you ready to invest?

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