Why should you invest in real estate? On the surface, an investment in real estate has the potential for high rates of return and substantial wealth growth. Here are a few more detailed reasons to invest in real estate.
Real estate is a high-value tangible asset
Some investments, such as stocks or a vehicle fleet, can leave you with little to no tangible asset value because of a decrease in value over time. Investment in land, buildings, and real estate developments are things that will always have definitive value attached to them. Property insurance will protect your investment in real estate, so your asset is protected in the worst-case scenario.
Real estate investments are an excellent way to diversify your portfolio
Including real estate investments diversifies and strengthens your portfolio. Rather than relying solely on the stock market, expanding and diversifying your portfolio is key to weathering uncertain economic climates like we are currently experiencing in 2020.
Real estate gains are deferrable
Section 1031 of IRS code provides that real property held for rental property tax deductions, investment, or use in a business can be exchanged for “like-kind” real property also held for rental, investment or use in a business, allowing the Investor to defer his or her Federal, and in most cases, state rental income tax rate liabilities.
Real estate investments often bring tax advantages
If properly structured, you may be in a position to claim tax deductions related to depreciation, interest expense, and other items related to your real estate properties. For instance, the IRS allows commercial real estate (CRE) investors to deduct some of a property’s depreciated value to account for the cost of maintenance and upkeep.
Real estate can be leveraged
This is one of the most important advantages of real estate investment. Once you have built up an equity position in an investment property, you can leverage that investment for cash in one of two ways: Secure a second loan against the increased equity or refinance the original loan amount plus the increased equity. This frees up money to buy another investment property.
Creates a hedge against inflation
As wages and profits increase in the larger economy, this also generally increases the amount that property owners can charge for space, as well as what tenants can afford to pay in investment properties.
Depending upon the use of the real estate holding, you can use it to establish predictable cash flow
If your investment property is rented out to others or in use for a consistent service, the payments involved go directly to you and create a very sure source of funds for you. A significant portion of the total investment return comes via current cash flows from rental income.
Investing in real estate not only an asset to your portfolio, but it can add value, function, and beauty to your company and your surroundings.
At Scandia, we believe that real estate should be first class. Investing in properties that edify and elevate their surroundings and the people who inhabit them is our goal. Real estate is not an investment in just the physical property — it is an investment in the growth and future of your company.
Investing in real estate on any level can cause widespread positive effects in your finances, and can also be very fulfilling as a supplement to your company and career.