Buying a home has its benefits. You can build equity, you get loads of tax perks, you can customize the house as you wish, and you have somewhere to put down roots for the long haul. (There are no pesky landlords either!)
But investing in other types of real estate — like rental homes, multifamily properties, short-term rentals, or even house flipping? That can come with serious benefits as well.
Are you considering investing in real estate this year? Here are four advantages you might enjoy if you do:
1. It could add extra income.
Real estate can be a great way to increase your income. Rental homes and short-term/vacation rentals can make for solid passive income streams, while home flipping can generate profits in a fairly short span of time.
You can even consider investing in things like real estate stocks and REITs (real estate investment trusts) and earn money based on how various real estate companies and developments perform.
2. It can protect you against inflation.
Real estate investments are generally considered a good hedge against inflation. During inflationary periods, home prices — as well as the rents you can command from a rental property — naturally rise. This ensures your money retains its value, despite rising inflation.
3. There are tax benefits.
Real estate investors enjoy a number of tax benefits. There are deductions for taxes, insurance, maintenance, depreciation, and more. Though you may need to pay capital gains taxes when you sell a property, these often come in lower than your income tax rate, saving you in the long run. Additionally, if you opt to invest in opportunity zones — designated spots that need investment — you’ll pay even less.
4. It’s a good way to diversify.
Putting all your eggs in one investment basket is risky. If the stock market plummets (or whatever else you have your funds in), it could mean losing it all.
By putting some of your money into real estate, it ensures your funds are protected if (and when) one investment sector performs poorly.
Get help with investing in real estate
If you’re thinking about investing in real estate, make sure to talk to a loan officer at an Embrace Home Loans office in your area first. They can help you determine the best (and most affordable) financing option for your goals, budget, and financial picture.
