The most immediate benefit of investing in real estate is passive income. When you rent out real estate, you can use this passive income to pay off the property’s mortgage and the property will continue generating income afterward, free and clear. This is a stable and relatively low-risk form of investment as compared to the stock market and it’s a proven approach to investment for many individuals.
Equity is an asset, providing leverage toward gaining more real estate, which can in turn provide further income. Building equity is a great benefit of investing in real estate and it has the added benefit of opening doors of opportunity for further investment, such as qualifying for larger loans or building cash reserves. Equity is calculated by subtracting the loan balance from the value of a home which you can choose to borrow against with a home equity loan or receive cash after the sale of your property and this cash can then be used as a down payment on your next real estate investment.
According to the Tax Policy Center, the main benefit of owning a property is that the rental income received from such real estate is not taxed. Additionally, investors can still deduct mortgage interest and property tax payments, along with certain other expenses from their federal taxes. It also helps that homeowners may exclude, up to a certain limit, the gain realized from selling a real estate property.
Last and certainly not least, rehabilitating a run-down real estate property not only has the potential to increase your wealth but also that of the community in which you choose to invest. Restoring properties can help restore the vibrance not to mention local tax revenue of a community, providing for its properties, roads, schools and other public services. That’s something to feel good about.
Want to learn more? Read more about the benefits of investing in real estate.
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