Friday, April 29, 2016

Top 8 Benefits for Investing in Real Estate

Top 8 Benefits for Investing in Real Estate By Atchut Neelam

Many benefits can be accrued from investing in real estate and they include:

Financial leverage accords you the ability of financing real estate success even when you have a debt. What many people don’t know is that successful investors optimize their leverage well. “Borrow to buy, sell for cash” is the general rule. Since the best investors look for properties they can provide the most financing, strategies are used in order to optimize leverage.

2. Operating leverage
Due to a large proportion of fixed costs to total costs, operating leverage is present in real estate properties. The characteristic helps to define the relationship between sales volume and profitability. In today’s business world, commercial real estate has a wide degree of operating leverage thanks to fixed costs. What you need to know is that large fixed costs require more volume of sales to break even.

3. Resistant to inflation
What many people don’t know is that real estate values rise faster than inflation especially when compared to consumer goods and services. This is because their prices tend to be inelastic. What you need to note is that it depends with the location. You need to exercise great care when selecting commercial real estate opportunities.

4. Tax benefits
Interest costs help to reduce the cost of funds for your marginal tax rate thanks to real estate tips. This is one advantage of investing in real estate properties. Interest costs are fully tax deductible especially for your personal and commercial real estate investment.
Depreciations are a legitimate deduction which offsets the revenue that would be subject to taxes. This is another benefit when you invest in real estate.

5. Real estate investment equals owning your own business
More control over your life is the ultimate goal for everyone and this drives many to start their own businesses. Real estate investing will enable you to achieve this. One can start small and make investing in real estate a hobby. Alternatively, one can start small and with time after inputting creativity, good moves and more finances, they can get to grow their investment making it a business.

6. Buyer advantage in an inflationary world
Real estateinvestors are generally debtors who borrow money and pay back later. This is a benefit in an inflationary environment. Since interest rates adjust during inflations, they get to add an inflation premium which is a slow and uncertain process.
This has led to many economists to rethink about the possibility of inflation helping to distribute wealth to the society.

7. Compounding flow of cash
Compounding flow of cash is a benefit real estate investors get to reap. For example, if one makes a deposit of $10,000 on a well located apartment which has the potential of earning 21% annually over the next 15 years, it will net one $174,494 but it will take a long time.
While this is the miracle of compound interest it is also the surest way of creating wealth.

8. Begin small
Governments and experts encourage home ownership. It has led to policies by banking and financial institutions to create easy ways of acquiring a home. Homes can be bought with little amount of cash up front due to this. Interest payments are subsidized in order to make them deductible over earned income.
This can also lead one to purchase a second home therefore creating a successful path for a real estate investor

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