Investing in real estate is the way to wealth. But it needs a sound real estate investment plan for that.
Real estate can make one rich even when one sleeps. It is why it is considered one of the safest investment sectors for the last two centuries. More than 90% of the millionaires across the world have made their wealth through real estate investments. A good real estate investment plan can offer significant dividends even for an average investor.
10 Reasons for investing in real estate
1. It gives a tangible asset with more control
Unlike an investment in stocks, real estate investment yields a tangible asset. Stock investments are always volatile and can be a big zero for circumstances beyond your control. Real estate investment has no such lacuna.
2. Its value increases with time
The value of one’s land or home always increases with time. History also proves that the longer you hold a property; it lets you earn more money. While the real estate market has passed through some turbulence in the past, it has recovered from those uncertainties. So, one can enjoy the blowing breeze.
3. It helps to diversify the portfolio
Diversification is of paramount importance in financial planning. It helps one to mitigate the risk by spreading. Being a safe and tangible asset, real estate is a good way to do that. A large number of people have minted money by investing in real estate.
4. It entails many tax benefits
One can get numerous tax benefits by investing in real estate. It includes deduction of tax on mortgage interest, operating expenses and costs, insurance, and a lot of other benefits. It allows the investors to take advantage of these at the end of the financial years. Real estate investments also attract lower tax rates.
5. It yields a regular and predictable cash flow
The cash flow is net income after meeting all operational expenses and making mortgage payments. A good real estate investment plan can provide one with a great cash flow.
6. It builds up equity
Most real estate investments involve a small down payment. Lenders provide the maximum amount through debt financing. As the principal amount is repaid it helps to build equity.
7. It allows leveraging
Leverage is the most important advantage of investing in real estate. One can borrow capital and use that to increase the return. When one uses a mortgage for reducing the capital investment to purchase the property, leverage is generated. Once, one builds up equity, it can be used for another loan against equity. Additionally, one can also refinance the original loan amount. This frees money for further investments.
8. It is improvable
One can always improve real estate. This becomes possible as real estate is not virtual, but a tangible asset. It contains land with the structure built upon it. So, one can make cosmetic changes to improve the value of the property and make it more worthy.
9. Real estate gains can be deferred
One can gain from the sale of real estate and transfer that to invest in a new property. Thus, it helps to defer payment of tax on the property sold.
10. It is easy for everyone
Investment in real estate is easy to understand for almost everyone. It does not require any business acumen. One can easily purchase and finance real estate without much trouble. Improving real estate and enjoying tax advantages are also easier.
How to make a good real estate investment plan
As real estate investments can build wealth, it is becoming increasingly popular. But one needs a good real estate investment plan to make it satisfying and lucrative. Maybe you are new to this industry and looking to make real estate investments. The following are some of the things to consider for making a sound plan.
1. Set goals
Setting a goal is the first step. One must be clear about what one wants to achieve by investing in real estate. It is required to stay focused throughout the journey. Check, if you want to have a regular income or a quick profit and develop your plan accordingly. Once the goal is set, you can choose the right property.
2. Set a time frame
Setting a time frame is equally important as setting goals to develop a sound real estate investment plan. It motivates one to achieve the goal. In case you are planning to invest in your retirement, you must account for the years you have left for working and saving.
3. Create an investment strategy
Plenty of ways are there to make money by investing in real estate. Instead of spreading your finance everywhere, you must find out a niche and operate in that. You should invest in rental properties for a steady income. Also, note how much time and money is required for maintenance. A detailed budget can save you from difficulties later. If you decide to buy flip properties, you must be sure about the best available price.
4. Know the market
Before you make a real estate investment, you must try to know as much as you can about the area to develop a foolproof real estate investment plan. If the property you intend to buy falls in a dangerous area, you will have a hard time renting and flipping.
5. Figure out the mode of finance
No plan can materialize if you cannot arrange finance to fund your real estate investment. Several options are available for this. You can borrow hard money, or opt for mortgaging the asset. Do extensive research to make your investment a breeze.
6. Do not rush
Formulating a real estate investment plan is not that easy. A single mistake can cost a huge amount in the future. So, one should weigh all pros and cons for setting up the plan.
Investing in real estate delivers fun, enjoyment, and happy memories. It also has enough flexibility and offers many diversification options. Make a sound real estate investment plan and reap the benefits it offers. – Reza Abbaszadeh