Benefits of Investing in Real Estate
Entrepreneurship is the one and only path through which individuals can realize their financial dreams and one of the easiest and most effective mode of investing comes in the form of real estate. Real estate is a perfect avenue to make substantial financial gains over a long period of time while keeping the costs and liabilities low. Below we discuss some of the reasons that make real estate a perfect investment option for budding entrepreneurs.
Stable Cash Flows
The most attractive feature in real estate is the stable and regular cash flows. Most businesses make millions in profit, but struggle to maintain a healthy cash flow required to meet their financial obligations and continue investing towards their long-term financial plan.
Cash flows from real estate are far more stable and predictable as compared to other businesses in America. This is an amazing advantage to have when an entrepreneur is in the initial stages of his investment. Having an extra sum in your hand can be great for ups and downs in an individual’s life.
The Loan Payment
Most individuals hesitate to start their own business due to the high risk of losses or lack of strong financial backing. But in real estate, it is extremely easy to take loans from the bank. These loans would be essentially paid by the tenant and the investor would continue enjoying the increase in the net worth of the asset over time.
Today an investor might owe $200,000 on a property, but next year as the tenant continues to make the payment towards the loan he may only owe $195,000, which means that he gets $5000 wealthier without doing anything. When the loan is completely paid off on the property he would have a substantial asset in his hand that he can sell or continue renting out for a regular cash flow.
If a business earns $100,000 during a year and a real estate business also earns $100,000 during a year then the real estate business would be able to keep more of its money. There can be different kinds of perks and tax benefits that ensure that the real estate investors get higher savings on their earnings.
Inflation and Capital Appreciation
There is an established economic principle that the value of money declines over time and commodities become more expensive while for other kinds of businesses this means lesser profits or higher costs, but for a real estate investor the prices of the properties increase in line with other commodities but their liabilities on mortgage payments remain fixed. This amazing feature ensures that the investor earns rent at the market rate that would keep increasing over time while his liabilities remain fixed at a certain amount.
The decline in the value of money would also inflate the price of the property that means the investor would be getting dual benefits out of his money in the form of capital appreciation while having to pay off fixed amount of mortgage payments.
For more information and advice on investing in real estate, please contact our team at Anne Street Partners or call 135 444 today!