Why Real Estate is a Good Investment
Many people assume investing in real estate is for the rich and famous. However, neither is accurate, and anyone can do it. Whether you’re a real estate guru or starting, you stand to reap the benefits of investing in real estate with the right research and preparations.
So, Who Should Invest in Real Estate?
There isn’t a guideline that defines who can invest in real estate. If you’re motivated by the desire to grow your portfolio or diversify your investments, you should go ahead and invest.
Those looking to diversify their investment
For those that have invested in risky ventures such as the stock market, investing in real estate would be a prudent way of diversifying their investment. Having investments in several places will lessen the losses, in case one of the investment doesn’t perform as well as previously expected. For example, the stock market is highly volatile and unpredictable. A stock market crash, while not likely, is still possible. If it does, and all your money’s in stocks, you could potentially lose everything.
Those new to investing
Real estate is a fantastic place to begin if you are starting on your investment journey. Once you know the budget you are working within and know how much you can spend, you can begin your search. Some beginners can start by buying a multi-unit property, residing in one, and renting out the other area. Doing so allows you a great start and learning opportunity as your investment skills grow.
Investors looking for cash flow
If your looking for consistency in cash flow in Kansas City, real estate is a phenomenal choice. Ideally, many investments don’t have a cash flow advantage. Once you invest in assets such as stocks, you can’t access the money until you sell the stocks, unlike in real estate. By buying and holding real estate, you can get cash flow by collecting rent monthly. You can offset your bills or expand your real estate portfolio with that steady stream of money.
8 Top Reasons To Invest in Real Estate
If you’re planning on venturing into real estate in Kansas City, you’re in the right mindset and about to enjoy investing in one of the most promising sectors. With the constant growth in both commercial and residential properties, there are many opportunities to take advantage of in KC. Not to mention, Kansas City landed in the top 100 on U.S. News and World Report’s list of the “150 Best Places to Live in the U.S. in 2021-2022”. Here’s why you should invest in real estate.
1. Real Estate is a Tangible Asset
Investing in volatile investments such as bonds or stocks can only be proofed by a piece of paper, and you possess no ownership. More so, if the stock market tanks, you will have nothing to show for all your investment.
However, buying a home offers you a tangible asset any day. Although prone to depreciation and appreciation throughout the year, at least you’ll have an asset you can refer to when tough times come knocking. You can always recoup your investment capital gains when you finally decide to sell.
2. You Can Leverage Your Investment
Equity is the difference between a home’s value and what is owed on the mortgage. The difference is the profit. You can leverage the equity to expand your investment as you pay the mortgage.
You can put down a fraction of a home’s value and own it. As you continue paying the mortgage, you’ll continue holding more of the house and gaining more returns due to the natural appreciation of real estate. Operating this way will save you lots of waiting time to acquire the down payment for another home.
3. Real Estate Appreciates
It’s recommended you invest in real estate for the long game. If you do, chances are your property will appreciate. Although housing crises do happen, they are rare. In most cases, lands and buildings tend to return more than the investment capital.
Another unique aspect of real estate, unlike other investments, is you can force appreciation. As strange as it sounds, it’s possible! You can increase your home’s appreciation by doing renovations and repairs. Something as simple as updating the paint job can not only appreciate your home but get it to sell fast.
However, not all renovations will increase your home’s value. You need to consult a licensed appraiser or a trusted real estate agent (Team Blake has a few!) to guide you on the most valuable renovations. Although the return may not match 100 percent, you stand to recoup around 90 percent of the investment.
You don’t have to do major renovations such as making an additional room or finishing a basement, although these can significantly add more value. Even minor renovations in the kitchen and bathroom can greatly improve your home’s value.
4. Benefits of Tax Deductions
Like many other businesses that enjoy tax relief, so are real estate investors. Although it’s an investment, if it’s your home and you’re renting it out, then you’re running a business. As a business owner, you can use the advantages of tax write-offs on various things: mortgage interest, real estate taxes, and homeowner’s insurance. Similarly, all other maintenance expenses, including traveling to the property and accessories, can be written off. This significantly reduces your tax obligations and increases your profits.
5. You Can Pass Real Estate Down To Your Heirs
If you are looking to create an investment you can leave behind for your children, real estate is the way to go. Instead of leaving behind cash, you can always do better by leaving a real estate legacy. Your children will have an income-generating asset and still enjoy the benefits of its appreciation.
6. You Have Many Options
Real estate offers various ways of investing. If you find it stressful to buy real estate and rent it out, there are ways to go around that. Some people prefer to fix and flip real estate assets. This process entails finding undervalued homes renovating, and selling them. Ideally, you should do all this in under six months to minimize the costs. Doing so allows you the flexibility of buying another property and reaching your financial goal.
Also, you can invest in real estate as a middleman connecting sellers and buyers. You stand to make a decent amount by maintaining this link. Another option is house hacking. This involves buying a multi-unit property; you live in one unit and rent out the rest to cover your mortgage. A real estate investment trust is another ideal option for anyone interested in investing.
7. A Great Retirement Savings Plan
Investing in real estate is an ideal way of safeguarding your retirement future. If you invest in real estate for the long term, you’ll earn equity as time passes. In addition, you can always sell the property to get liquid cash to use when you retire.
When you decide to sell, you should consult with your tax advisor to get your tax liabilities reduced. You may not benefit from the capital gains exclusions because the property isn’t the main residence, but you stand to get your tax liability reduced in some way.
8. A Source of Passive Income
If you use the “buy and hold” investment technique, you stand to get steady cash flow monthly to see you through, unlike other investments that offer dividends quarterly or annually. If you manage your property well, you’ll enjoy a passive income on your investment.
Now is the Perfect Time to Invest in Kansas City Real Estate
If you’re thinking of buying a home in Kansas City, now is a perfect time to invest in real estate. The huge demand for rental properties has created good investment opportunities for those that want to enjoy passive income from renting out their homes.
Many people are now seeking rentals, either because they can’t afford their mortgage due to the effects of the pandemic, or they’ve relocated and are starting fresh. Real estate investment is a smart move to ensure your financial security.
If you’re looking for just the right property to start your investment portfolio, contact Team Blake! We can work within your budget and goals to help find you the right property to invest in.