INVESTING IN A VOLATILE ECONOMY: IS REAL ESTATE STILL AN OPTION?
I’m going to begin with a simple question: Is real estate still a solid investment option?
The simplest answer is yes, real estate is always going to be a smart investment. The important question is whether you should invest right now, and the answer to that depends on several considerations. And there are plenty of reasons it makes sense to buy residential real estate as an investment right now.
Real Estate Investing Can Be Profitable When Done Right, Thanks To The Power Of Leverage, Tax Benefits And Cash Flow.
Real estate investing can be profitable when done right, thanks to the power of leverage, tax benefits and cash flow.
Leverage:
Investing in real estate is an excellent way to use leverage; that is to use other people’s money to make more money than you would otherwise have been able to alone. Leverage allows one to profit from the equity in your home or investment property (the difference between what it costs to buy and what someone will pay for it). You can borrow against other assets like stocks, bonds, or mutual funds by using margin loans at brokerage firms like Fidelity Investments or Schwab Retirement Plan Services.
Tax Benefits:
When you sell a house as an investment property, or any asset with unrealized gains, you do not pay taxes on those profits until after you sell if held for long enough; and most investments are. So, if you purchased a house for $100k but sold it for $300k after holding onto it for five years then only about half the profit ($150k) would be taxed at whatever rate your income falls into (15% top rate under current law). The rest would be considered previously deferred capital gains which are taxed at 20%. This means that instead of paying 35% federal income tax on all profits made from selling this house then keeping some money back every month will help offset some of those costs when they come due the following year since a lot IF NOT ALL OF THOSE TAXES WILL BE PAID AFTER THE END OF YEAR WHEN YOU FILE YOUR RETURN ONLINE WITH IRS IN MARCH!
It is not uncommon for investors to consider real estate investing to create wealth. Real estate can be a abundant investment vehicle, but it also carries substantial risks. Before investing your money in real estate, make sure you understand the benefits and risks associated with this type of investment.
Owning Real Estate Has Been a Proven Strategy for Building Wealth an Expended Number of Years.
Real estate is tangible; you can see and touch the property, you have a say in what happens, and how it is managed. If you are hands-on with your investments, real estate may be perfect for you. Conversely, real estate also makes sense if you do not have the time or yearning to manage your investments.
When you own a rental property and have a tenant paying rent, the property takes care of itself and allows you to concentrate on your life while passively increasing your wealth. The money earned from rental property can be invested in additional properties or for other financial commitments. You are not tied down to the property; when tenants move out it's not like owning a condo where you have to sell it before someone else moves in.
It is Important to Know Whether Buying Residential Real Estate as an Investment RIGHT NOW Makes Sense.
Is the market too hot?
It is important to know whether buying residential real estate as an investment right now makes sense. If there are great deals available, then jump while they are still available! On the other hand, if prices are skyrocketing and no one is selling their properties, that is undoubtedly not what you want either. The key is understanding when it is time for action and when it is time for patience
The Case for Buying Residential Real Estate as an Investment In Today’s Market.
As we have reviewed, the real estate market is no longer as straightforward as it was in the past. Today, there are several factors one needs to consider when making an investment decision. One should determine whether your city is over-saturated, one can easily find this information on Zillow or Redfin. If you see there has been substantial growth within these metrics compared to other cities then chances are good that prices have also increased substantially since last year, which makes buying into said market risky!
Conclusion
Real estate investing is not for everyone but has worked tremendously well for many people throughout the course of history. Buying residential real estate as an investment is still worthwhile today. There will always be demand for places to live, and with historically low interest rates and tax benefits, now may be a good time to invest. Leased properties can take care of themselves once you have done your research and purchased knowledgeably. If you are looking for an form of passive retirement income or just want to build wealth over time investing in residential real estate may be worth considering for you!
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