6 Benefits of Real Estate Investing


6 Benefits of Real Estate Investing

By Christopher Starr

For years people have wanted to stake their claim in real estate.  Whether to realize the American Dream of home ownership or as an investment vehicle.  The richest people on the planet understand that having real estate in their portfolio is great for wealth growth and preservation.  Although there are many, below are six benefits to investing in real estate. I must state that myself or IndyCal Capital are not legal, accounting, or tax professionals and readers should seek appropriate counsel from a professional in each field.

#1 - Mitigate Risk

One of the greatest benefits of having real estate in your investment portfolio is for mitigating risk. Sure, having an income month after month is an outstanding benefit, but having protection against higher-risk investments is critical. Having the right blend of real estate in your portfolio can offer just enough diversification to help offset exposure by not focusing only on one single investment profile.

#2 - Tax Benefits

Depreciation is a free tax write-off that allows you to keep more profits in your pocket.

#3 - Rising Demand

The need for housing is constantly rising, especially affordable housing in high-cost markets.  For those cities with strong population growth, there is a demand to build new property and update existing properties.

#4 - Cashflow

When structured properly, a real estate investment can provide an ongoing source of positive and passive income for investors.

#5 - Appreciation

There are several ways to gain appreciation from a real estate investment.  When paying down the principal of the mortgage the debt liability is being reduced therefore increasing the equity.  Our focus at IndyCal is acquiring value-add assets, which is a strategy to force appreciation by improving operations, renovation, and optimizing the income and expenses of a property.

#6 - Leverage

Intelligent investors utilize debt as leverage when acquiring real estate.  By doing so, the investor’s capital can be spread across multiple acquisitions rather than paying cash for just one property.  For example, investors commonly use 60%-80% leverage on an acquisition. This means for a $1 Million purchase, the investor will obtain a loan for up to $800,000 requiring only $200,000 of equity.  So now, instead of an investor placing $1 Million of cash on one property, they can now spread the cash over five properties of the same price.

Which of the six benefits above is your favorite, or share another benefit you enjoy.  Share in the comments below!

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