Investing money is a great way to start building that desirable “nest egg” for retirement. There are numerous ways to invest your money. While it completely depends on your personal goals and needs, experts agree that one of the best long-term investments is real estate. Why is this? Well, we’re going to tell you.
You Have More Control
- You choose the property
- You choose the tenants
- You choose how much to charge in rent
- You choose how you’ll manage the property
If you decide to invest in stocks or mutual funds, you do have the ability to choose which stocks or funds you want to invest in, however once that decision is made, you do not have the freedom to manage and control your money once it is invested.
Property appreciation refers to the increase in value of a property over time. Real estate is much more likely to increase in value than your typical stocks and funds which can go up and down. It is important to look at real estate as a long-term investment.
In real estate, the term appreciation refers to the increase in the value of a property over time. From a macro level, appreciation may result from inflation, increased job opportunities in your market, and overall development in your town. You can raise the appreciation value with home improvements.
While there are factors that you have little control over, there are several actions a homeowner can take to increase a property’s value. Enter home improvements:
- Bathroom upgrades
- Kitchen upgrades
- Replacing the roof and windows
Furthermore, if you took out a mortgage to purchase the property, by setting the rent accordingly, you can build equity in the property over time with little to no money out of pocket. Speaking of which…
Money in Your Pocket
Unlike stocks and mutual funds, which are difficult and often expensive to liquidate, real estate investment gives you access to money immediately. How? After the deduction of expenses from the monthly rent, what is left over is immediately available for your use.
Paying Off Your Mortgage
If you’ve used a mortgage to buy rental property, the rental payments can help you pay off your mortgage quicker by giving you money in your pocket to make extra payments. By doing so, you accelerate the time it will take for you to own your property free and clear.
For every year that you own the property, you will be building wealth that you will eventually be able to access through refinancing or selling off the property. Remember, real estate is a long-term investment.
While tax laws change on a regular basis, in general property investment can offer you a great way to reduce your annual tax bill. Property owners can write off expenses associated with owning a rental property.
It is important to note that real estate investment can be a complicated process and to ensure it is a successful investment, it’s often a good idea to consult a financial advisor first to determine whether real estate investment is the best use of your money long term.
Owning a rental property can be very rewarding, but also involves a lot of hard work. Many property owners make the decision to hire a professional property manager who can oversee not only the day-to-day running of the property but can also advise on any adjustments that need to be made to grow your investment as successfully as possible.