Cash Flow Consistency:
For the most part, the only way to generate returns on stocks is through growth or fractional, periodic dividends. That's not the case in real estate. Property owners can generate monthly cash flow through rentals all while the asset appreciates. This ability to generate returns on returns can make real estate a truly impactful addition to a diverse portfolio. But while it's simple, it's not always easy. Finding an investment property, completing the necessary maintenance, and finding a trustworthy, reliable tenant can require a lot of work. Luckily, there are resources and companies that can make this process worthwhile.
Improved Appreciation:
Generally speaking, real estate assets appreciate at a rate that matches or exceeds most mortgage rates. This means that even without rent revenue or property improvements, you can still realize a net positive rate of appreciation. That said, the beauty of real estate is that it is a tangible, useable asset. Real estate investors can generate income through renting to good tenants, or they can try to increase the value of a property by making repairs and improvements to the building itself. This isn't possible in other asset classes. There is little, if anything, you can do to improve the value of a stock or cryptocurrency. Real estate gives you the chance to be proactive in making more money.
Leverage Opportunities:
Real estate is one of the few investment avenues where beginners can immediately use leverage to their advantage. Leverage is the process by which investors use other people's money (loans) to purchase a yield generating asset. In property investments, this means you put down a fixed amount, often as little as 10%, and use a lender to cover the rest of the purchase price. Fixed-term payments give you more and more ownership over time, all while the property appreciates in value. If you are interested in flipping the asset or utilizing the BRRR method, you can realize gains even faster.
Tax Benefits:
There are many tax benefits and write-offs available to real estate investors that aren't available to others. If you purchase a property through an LLC, which is required by The Hard Money Co., you can write off a number of expenses.
These include:
- Interest paid on the loan
- Origination points
- Maintenance expenses
- Depreciation
- Property Taxes
- Homeowners Insurance
- HOA Fees
While the specifics of your tax benefits may change based on your circumstances and locations, the options are there. Consider consulting with a tax expert to see what might be available to you.
Financial Impact:
It is recommended that you maintain a diverse portfolio, but real estate can be your foundational piece. All asset classes experience volatility to some degree, but real estate is a tangible asset that has always resulted in positive yields over a long enough horizon. Additionally, the added benefits of consistent cash flow, tax write-offs, and leverage opportunities make this a sound allocation of your excess capital. The Hard Money Co. is here to help you invest in real estate get started on the path to building generational wealth.
