The real estate market is in a continuous state of improvement, and it is easily viewed as a viable long-term career option. If you are thinking about getting into the market as your profession, there are a number of reasons to do so. Increasing your cash flow is just one of them. That benefit carries with it a number of additional benefits that will keep more money in your pocket. Here are more benefits that may help you to make the choice to consider a new real estate investment career.
Real Estate Investing Defined
When you want to consider a new real estate investment career, think about what it is before you plan on how to do it. Be realistic. Real estate investing can look like the New York skyline, or it can look like a home on your street that you’ve been fixing up to sell for profit. There’s no wrong way for you to do it if you know exactly what you want to do.
There is more than one way to consider a new real estate investment career as well. Fixing and flipping is a common way to do it. You can also buy the property and rent it out as well. These are beginner-level ways of investing in real estate.
As your career grows, so can your real estate portfolio. You may look into real estate stock or investment trusts called REITs. It’s also possible to get into crowdfunding with some developments and deals.
Once you become realistic about your goals and needs with real estate, you will begin to see the many benefits.
Increased Cash Flow
Those that consider a new real estate investment career see dollar signs as the leading reason. There’s nothing wrong with that, that’s why people go to work. Cash flow is the amount of money you will have after operating expenses such as repairs and homeowners insurance. Operating expenses include paying the mortgage, and upkeep of the property. As you do this, you build equity.
You may want to look in locations where the demand is high and will remain high. That would include spots with universities, colleges, or highly populated urban centers where people are always looking to rent or buy. If you don’t want to manage the day-to-day, you can hire a property manager to handle everyday details for you. That may be an option down the road if you aren’t quite there yet financially. In the end, location will be the most important part of determining your cash flow.
The cash flow in real estate investment is the prime reason to consider a new real estate investment career. It brings with it a number of additional benefits though. This is not just a paycheck anymore, you are committing to a banking service with mortgages with 30-year terms. This is a career with long-term security. Not only will you generate income, but your property will appreciate in value with time.
Leverage Cash Flow
When you begin to consider a real estate investment career, you may only see your original cash flow. This is an exciting benefit all on its own, but there are so many more financial benefits. The property will give you leverage for almost every other major financial transaction that you will ever have.
You could purchase a property for $300 thousand but only have $75 thousand to put down. You may not even have to have this upfront when you have assets to leverage. When you are working in real estate investment, you can use your existing assets to set up a down payment on a property. This can also help you to initiate multiple properties at once.
Another way to leverage your cash flow is through multifamily loans. This is a loan where investors use multifamily loans to finance a number of properties that have anywhere from two to four units. This is a dwelling for multiple families or multiple commercial entities. Your multifamily loan is paid for by the tenants of a duplex, townhome, condo, or apartment building.
The leverage you have can boost your returns. Leveraging is about using other people’s money to increase your ROI on an annual basis.
Tax Advantages
When you consider a new real estate investment career, you will be enticed by the tax advantages. Home investors enjoy this benefit with any property. The more you own, the more tax advantages you will have. Some of these come with simply owning and operating your buildings.
Other tax advantages come with the more advanced levels of real estate investing. Income from tenants for example can not be subjected to certain taxes. Federal laws stipulate it is not declared as self-employment income. You will also see tax breaks if your property depreciates, and for operating costs. That includes everything from insurance to repairs. You can also write off legal expenses, property taxes, roof repairs, emergency plumbing, and travel fees. Capital gains taxes can also be deferred.
Be conservative with your leverage, and your monthly tenant income will pay for these expenses. Then you can use them come tax time. A tax attorney can help you with this.
Real Estate Appreciation
You may want to consider a new real estate investment career for appreciation purposes, a key benefit to this career. Your property value will go up in time, even during a slumping market. This is a cyclical industry, but real estate will be an investment that grows in time. Your income will come when it is time to sell. If you are renting, even better, because your rent can increase annually and increase your cash flow even more.
A real estate investment career is not a short-term gig. You may have a slump or two, but when you stick with it, you will see capital assets appreciate in time. In addition to appreciation, you are building equity and putting money back into your pocket every time you pay the mortgage. This is now an element of your net worth. As you build equity, you gain more leverage to purchase more property and build more income streams.
Despite what you may feel about the market now, properties do appreciate in time. Since 1965, property values in America have been on the rise. That changed in 2008 for a season when the real estate bubble hit. A pandemic has impacted the real estate market, but conversely. Today, properties are in high demand and sellers are winning. Appreciation is a benefit of being a real estate investor that will never change. You’ll diversify your portfolio with a low-risk investment that is expected to pay off.
A Hedge Against Inflation
The returns on real estate will fluctuate, but another reason to consider a new real estate investment career is its hedge against inflation. The cost of living increases with inflation, and your real estate investment grows with that. This is your hedge against inflation. In other words, you will have a guaranteed income that pays for inflation as it happens.
You will see some risk adjustments through the process, depending on your location, and the management of your property. The average return in real estate today is 11 percent over 50 years. You can make that return higher if you play your cards right.
Inflation hedging comes from the demand for the property and what the GDP growth is doing in time. When the economy improves or expands, the demand increases. This is when you see rents go up, and more capital value for your property. Investing in real estate will help you to keep the power of your capital in your hands while letting your tenants handle the inflation costs.
All of that goes into your own appreciation. In other words, you are in a unique position to reap the benefits of inflation, where others are worrying about it.
Real Estate Investment Trusts and IRAs
When you want to consider a new real estate investment career, real estate investment trusts (REITs) or IRAs may be on your mind for the long term. These are trusts that you can buy and sell publicly on the stock exchange. This does not have to be a long-term trust for yourself if you don’t want it to be. The payout and dividends are significant and can be as high as 90 percent.
Your property will be a hedge against any volatility in the stock market. There is an approximate 40 percent correlation between stocks and real estate. This means that a low correlation ensures your investment is less likely to fluctuate, or tick high up then tick high down, at the same
There are a number of different types of REITs. Those include REITs for retail, hotels, health care, and the mortgage industry itself. Each one has its own advantages and disadvantages unique to your financial outlook. All will pay off.
Many today are in retail which is considered among the biggest investments in the country. If you are shopping somewhere, it is probably part of a REIT. This is money that you could be making too.
Residential REITs work the same way. Expand your portfolio by not just buying an income property, but investing in a residential REIT. Consider the same factors you would when buying a property. A REIT in New York will make considerable gains over an apartment building in the suburbs.
Health care REITs are always going to be a safe investment because people will always need health care. Here you can invest anywhere you want, from nursing homes to hospitals. The capital gains made here are made when the hospitals thrive. The same concept applies to office buildings with REITs. That building needs to thrive for you to make capital gains.
Investing in a mortgage REIT is another option when you consider a new real estate investment career. This expands your portfolio even more. When you wonder who is making money off of your mortgage, it is someone investing in a mortgage REIT. Investing in a REIT is always going to be a safe investment, no matter what sector you choose.
IRAs may be another option for your real estate earning potential. Your current retirement plan may feel weak to you right now, and this may be why you are considering this career. You can take control of that by using real estate income and pouring that into a self-directed IRA. You will still have the same tax advantages as you would in 401 (k)s and a traditional IRA.
Be Your Own Boss
When you consider a new real estate investment career, you may be thinking about the freedom of being your own boss. After income, that may be the biggest benefit to this business. In addition to the multiple ways that you can make money in this profession, you are the one that makes all of the decisions. You will have the freedom to control your own financial future, even on the slump days. You decide what you buy, you decide who lives or works there, and you decide how much they pay. If you wanted, you can sell your home and redistribute that money if you so choose. You can even decide who takes care of all of the tenants’ problems.
Investing in real estate is all about the numbers. The more you invest, the more you will make, and you are making all of the decisions. The more you invest, the better the performance of your properties. When one is not doing so great, lean on the other for leverage.
Invest in Real Estate
When you want to consider a new real estate investment career, consider every benefit, of which there are many. Tax breaks and regular income are just the start of it. The beauty of investing in anything is that once you start investing, you won’t want to stop, because you will just keep making money. Get the ball rolling today.
