Did you know that about 70% of rental properties are owned by individual investors?
In 2021, over 323,000 of those properties were flipped for cash, grossing up to $65,000 in profit. The remainder were considered “buy and hold” properties that the investor rented out. That same year saw home prices appreciate by more than 18%.
These numbers highlight some of the many benefits of investing in real estate. If you’re wondering where to put your money—or how to earn more of it while counting sheep—investing in property is a fabulous way to do so.
Our quick analysis offers more advantages for you to get behind. Keep reading.
Enjoy Cash Flow Right Away
Owning a rental property isn’t as easy as our title suggests, but it can earn you money while you sleep—in the form of cash flow.
If you intend to rent the property out, cash flow is the money you make once operating expenses and mortgage payments have been paid. Every month, you stand to earn a profit through your tenants’ rental payments.
As you pay your mortgage down, even more of that money becomes a profit. In the meantime, the house continues to appreciate in value.
Hiring the best property management company near you makes managing your rental simpler, saving you time, and ensuring any issues get dealt with promptly.
Ability to Deduct Operating Expenses
Property management is just one of the operating expenses you can expect to pay when you invest in real estate. Other examples include landscaping, pest control, utilities, insurance, maintenance, repairs, and property taxes.
But there’s good news—according to the IRS, these are all tax-deductible.
Beyond your standard mortgage payments, the cost of maintaining your property is something you can deduct every tax year.
Rest easy knowing that improvements and upkeep are all eligible for deductions. Make sure to keep good records in the form of receipts, emails, and more.
Build Equity Over Time
Unless you buy a property outright, you’ll still owe money to your lender.
The difference between what your home is worth and what you owe is called equity. As you make payments on your loan, the principal decreases, and you start to build equity.
If you buy a $200,000 home and pay a 20% down payment of $40,000, you’ll have $40,000 worth of equity. Your equity increases as you pay off your loan. For example, once you’ve paid off 100% of your loan, you’ll have 100% equity.
You can access that equity for several things—renovating the property to make it worth more, reducing your outstanding balance, and even consolidating debt or paying tuition.
Don’t Forget Home Appreciation
Finally, investors can benefit from home appreciation—or the increase in a property’s value over time.
On average, home values increase by about 5.7% every year. Though it’s never guaranteed, and can fluctuate based on factors like location, it’s commonly believed that the longer you own a property, the more it appreciates.
In other words, selling a home too quickly after buying it can hurt the amount of profit you earn. If possible, sitting on your property gives you the opportunity to make more money when you do decide to sell it.
Real Estate Is a Real(ly) Good Idea
These are just a few of the core benefits one has from investing in real estate property.
If you’re looking for a great place to put your money, a rental property is worth considering. It’s low-risk, has a plethora of advantages, and can make you money—even while you’re catching Zzz’s.
For more great ways to educate yourself on a variety of topics, keep scrolling our page!