7 Major Benefits of Investing in Real Estate

Investing in real estate has steadily increased in popularity over the past 50 years. One of the most common ways to get into this market is to buy a rental property. If you have extra money this is a great way to make some passive income on the side. Here’s a simple list of 7 benefits of investing in real estate.

1. Steady cash flow

You make money each month that your properties are rented out. Keep track of the expenses of running the property, such as the mortgage, maintenance, etc. Create a spreadsheet to make sure you’re getting a positive operating profit each month. If you’re losing money each month you may need to increase the amount you’re charging your tenants each month.

2. Reduced income tax bills

Your properties depreciate in value over time. Many people don’t realize that they can claim depreciation as an expense on their income tax bills. This is a good way to increase the cash flow from your properties.

3. Tax-deferred compounding of value

Tax-deferred status is when investment earnings, such as capital gain, interest, and dividends, accumulate tax-free until the investor receives the actual gains. This applies to real estate in that you don’t have to pay taxes on your profits until you sell your property. Additionally, if you reinvest the money into another rental property, then you can avoid paying the tax.

4. No self-employment tax

The government likes to reward rental property owners. Therefore, your rental properties are not subject to self-employment tax. This is because rental property income is not considered wages unless you’re qualified as a real estate professional.

5. Inflation is advantageous

Prices of all products steadily increase over time due to inflation. This is beneficial for property owners who are still paying off their mortgages. Rates of rent and property value increase over time, while your mortgage payments stay the same.

6. Loan paydown

The paydown is when your tenants pay off your mortgage payments, therefore, paying down your debt. You can think of this as increasing your wealth each month. By the time your loan reaches $0 and your no longer paying the mortgage, you’ll be making a straight profit and you’ll also own a valuable asset.

7. You’re your boss

This is the most compelling benefit for most real estate investors. When you’re your own boss you have a greater sense of satisfaction and fulfillment when your company’s doing well. You decide which properties to buy or sell. You decide when you want to work. You have complete control over your success or failure. You have the ability to retire sooner.

Are there any other benefits of investing in real estate that we haven’t mentioned here? Let us know in the comment section below!