For many American’s, owning a home used to be a dream beyond reach. With the untimely collapse of the real estate market 7 years ago, and an unstable job market caused by the economic-downturn, there have been questions whether real estate investing is a good idea.
Although real estate is subject to ongoing maintenance, income collected from rental property is a great source of passive income. If you plan on going for retirement in future, investing in real estate could significantly produce more income compared to other traditional passive investments.
Why real estate investing should be part of your overall investment portfolio
Appreciation: Investing in real estate is a good way to build equity for retirement income, since the property you own has the ability to increase in value over time. Though this is not guaranteed, choosing the right location like cities that are growing, can have a great impact with the increasing value of the property.
Leverage: The best thing about real estate property is the ability to purchase using borrowed funds. This means you have the opportunity to buy property by putting down a small percentage of a property’s value. While you essentially control the property, it serves as a way to secure the debt from borrowed funds and not any other assets.
Tax advantages: If you own a rental property and do not receive net cash flow after deduction of expenses, rental income from your real estate investment won’t be taxed. It simply means you own more of the total value of the investment (apart from just being in control), since your mortgage is paid-off. You are not required to pay any taxes on the money that’s working. But Instead, you have the option of pulling out your tax-free funds through refinancing your loan as soon as interests rates have fallen and the value of your property appreciates. In addition, you may steer clear from paying taxes if you have plans of selling your rental property, then have the funds reinvested in the purchase of another property by applying section 1031 of the U.S. Internal Revenue Service Code, also known as the like-kind exchange.
Good source of current income: Ideally, this refers to income from your rental property left after all expenses, including the mortgage loan have been settled. It is monthly income generated from your real estate investment, which you necessarily didn’t have to work for.
Generating more passive income from your real estate investment requires an understanding of what works best in your interests. Feel free to contact us today for help with real estate investing.