Real estate is among the most popular forms of investment today. Traditionally associated with riches, status, and credibility, real estate is considered the safest and most profitable way to preserve wealth. Unlike other modern investments such as cryptocurrencies, mutual funds, stocks, and bonds, real estate is resistant to sudden stock market changes. In this article, we’ll outline four reasons why it might be a good time to invest in real estate.
-
1. Increasing demand for rental properties
The market demand for rental assets and properties has registered significant growth in recent years, and the trend is anticipated to continue. The market is expected to increase to $3,388.85 in the next four years at a CAGR of 7.2%.
There are various factors that have influenced the demand for rental properties, including lifestyle preferences, job market, and affordability. For instance, renting can be more affordable than buying in areas with high housing prices. The movement of people from the countryside to urban areas is also skyrocketing, which has caused an increased demand for rental houses in cities and towns. Investors who purchase rental properties in 2023 and beyond can expect to see good investment returns.
-
2. Value appreciation and leverage
Like most alternative investments, the values of real estate tend to increase over time. With a suitable investment, you can create reasonable revenue when it’s time to sell your property. Rent also tends to increase with time, which can lead to higher cash flow.
It’s historically evident that the more you hold onto your property, the more money you will make. Real estate, also being a tangible asset, can be leveraged to capitalize on various streams of revenue while enjoying the benefits of appreciation.
-
3. Tax benefits
Real estate investors can leverage several tax breaks and deductions that can save them money during tax time. For instance, in many countries, an investor is allowed to deduct the interest they pay on their mortgage from taxes, which can save them a lot of money over the life of the loan. The government also offers tax breaks for insurance, proper depreciation, legal fees, repair and maintenance costs, and even interest paid on a mortgage.
These deductions can help to balance the cost of owning a property and make investing in real estate economical. Tax benefits are the greatest attractions of real estate investments, if not the most.
-
4. Generate cash flow through rental income
Cash flow is the net profit from a property investment after running costs and mortgage payments have been made. Since it’s a tangible asset, one of the key benefits of real estate is the ease at which it can be purchased and the ability to generate cash flow. A stable monthly rental income is a great source of passive income and provides long-term security to real estate investors. In most cases, cash strengthens as you pay your mortgage and build equity.
Endnote
While low property values and affordable mortgage rates are yet to be seen, 2023 and beyond are expected to bring many profitable opportunities for real estate investors. Nevertheless, a potential real estate investor has to know the risks or challenges linked to real estate investment and take steps to reduce them. Make sure to do in-depth research and find help from an experienced real estate agent if you are looking to invest in real estate this year.
