Why Invest in Real Estate?
Let's look at some of the advantages in detail:
APPRECIATION - Over the past 80 years , real estate values have continually increased. There have, of course, been some periods where values decreased, but the overall trend has been nothing but up. Like anything else, the value of real estate is determined by supply and demand. Shelter is a basic human need. People need places to live, work and play. In periods of high inflation, real estate values go up. Real estate is an investment that benefits from inflation.
LEVERAGE - A great thing about real estate is that you can tie up a big asset with a relatively small amount of money. You can easily buy a $500,000 home with only 10% ($50,000), down payment. To illustrate the power of this, consider this example:
TAX ADVANTAGES - You can deduct, as an expense, interest on the mortgage, property taxes, insurance, repairs, inspections, and depreciation on your investment real estate - no matter how much you own. This should not be confused with the tax exemptions for personal residence.
FREEDOM - While there is management and record keeping required, it is nothing compared with some other investments. If you invested in a business such as a dry cleaners or a restaurant, you would be personally attached to the investment, putting in many hours of personal time. Real Estate investing can be done without too much interference with your current job.
SOMEONE ELSE PAYS FOR IT - With Real Estate, the people who occupy your buildings are called tenants. You provide a service and they pay rent each month that you then in turn use to pay the mortgage. The tenants literally buy your investment property for you! When you invest in stocks, bonds, or precious metals, you may receive a dividend but it is typically no where near the return you receive when renting a shelter.
CASH FLOW - Real Estate provides you with a monthly cash flow. This can be very significant income in a multi unit building.
SOLID ASSET - Real Estate is widely recognized as a solid investment to own. Like gold, it's looked upon favourably by analysts reviewing your financial strength. Real estate is also easy to borrow against should you need extra capital.
Once you understand all of the advantages of investing in Real Estate, it is easy to see that very few investments can match the stability and flexibility of house and home. No wonder it is the favourite of millionaires!
An informative link to information on the The Residential Tenancies Act , effective January 2007.
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