While there are countless ways to invest your money, real estate has proven to be one of the best long-term investment options. If you’re looking to get your first investment property, the best way to invest in real estate is to buy a rental property and lease it long term. While this process involves a considerable amount of effort, most investors realise that commercial property investment provides the best results. You can gain consistent cash flow and a long term-term investment return. Providing rental management services is one of the best ways to grow in real estate.
Here are a few reasons why purchasing a rental property is a good investment.
HIGH RETURN ON INVESTMENT
Both High leverage and high ROI have relatable interests. When you use mortgage loans for an investment, you’ll be using only a small part of your own money to invest in property management, which means you gain a high return on your investment in the long run. In addition, on leasing the property to a tenant, the rent is structured to not only cover marginal expenses but to also cover the interest payable on your mortgage loan. As a result, you have a higher interest than other investment types. Your ROI increases as your profits exceed the interest you owe. This explains why real estate is considered to have a high return in the long run and is perceived as a high performing asset with commercial units for sale. An additional benefit is that any increase in value on your property makes your ROI increase further. With the high leverage in the context, your monthly cash flow increases which leads to an increase in your ROI.
Buying a rental property means that you’re in total control of the tenant you’ll lease to, how much you’ll charge for rent and you’ll plan for house property management and maintenance while leasing the property to tenants. There are other ways to derive cash flow, you can decide to use services like Airbnb to provide a short term vacation stay or contact reputable property management companies and strata body corporate to assist you to locate and service long-term tenants.
According to the type of tax deduction, the cost of repairs on the building will be deducted in the year in which they are carried out.
Similar to investing in a stock, you’re in control of the stock you wish to invest in, you have the opportunity to hire someone to manage and control your income.
ABILITY TO ENSURE YOUR PROPERTY
While many investors opt to purchase rental properties, they don’t consider that they can ensure the property investment. With the right insurance coverage, you can protect the property so matter the incident that occurs you’re fully covered. If you’re concerned about the cost of insurance, you can make a plan and incorporate it into the rent that your tenants pay.
In addition, you can deduct insurance premiums from any insurance policy related to your rental property. Some of them include the cost of employee insurance, theft, fire outbreak, or natural disasters.
DIVERSIFY YOUR ASSETS
The power of diversification is fully harnessed in real estate investment. If you want to achieve reasonable benefits without high risk, it is advisable to invest in many other markets. The real estate market has its domain and your property is included. Real estate is a valuable asset to own because it appreciates over time. Even as there have been past market crashes, it has still proven to be a safe and steady market, especially in the long run.
Another good thing about real estate is the ability to research the market based on your preferred choice of location. You can keep up with the newest trends that will guide you through your decision-making process about the real estate market, which is a much favourable environment compared to the stock market.
If your home mortgage falls under the 30-year fixed-rate mortgage, it means your interest rate will not change for the entire 30-year term of the loan. As the loan is initiated, additional money is paid to interest than to principal, but as soon as the term is halved, it reaches an equal split.
This means that the longer you hold your property, your tenants’ fee covers more of the loan principal, which also means you’ll be creating more wealth for yourself.
As long as you own the rental property, you’ll be using the tenant’s fee to pay off your debt. While you reduce the loan fee, you will be acquiring wealth and consistent cash flow as you will always have unlimited access to the money either by flipping and selling or refinancing your loan.
WARD OFF INFLATION
Real estate handles rising inflation better than other domains. This is because as prices go up, the value of your asset increases. You can easily ward off inflation when you make use of leverage to invest in rental properties with a low-interest rate. Many investments are at risk during inflation because there’s a high chance it can reduce the value of assets.
On the other hand, the benefit of real estate investment offers a great way to protect your wealth. The increase in rent makes it possible for you to accumulate more money which will always come in handy as prices of goods are likely to increase during inflation.
DECIDE TO SELL AT ANY TIME
A rental property is a good investment option because you can decide to sell whenever and however you prefer. While it is advisable to hold on to your investment over the long term, no fixed rule exists. You are in charge of every selling process. There are many different exit strategies you can take leverage to maximise profits. The choice is up to you. With the right real estate accounting, you’re likely to sell your property at a higher price than the initial cost.