The benefits of real estate investing are real, and more and more people are taking advantage of them for a variety of reasons. From portfolio diversification to simply scratching the itch to go into business for themselves, people all over Atlanta and beyond are making real estate investment education a part of their plan for the next step of their financial lives.
In today’s blog from Real Estate 360 Pro in Atlanta, we will cover some of the most commonly cited, and coincidentally some of the best, benefits of investing in real estate. To learn more about our real estate investment education programs, one-on-one coaching, and podcasts, visit our website, or get in touch with us today.
Real Estate Investing Builds Equity
The American Dream is built upon the idea of investing in real estate largely because of the power of equity building that owning a home or other property creates. When you purchase a house, your monthly mortgage payments won’t go completely up in smoke the way that rent payments do. A portion of that payment, the portion which is applied to your actual loan principal, will essentially end up back in your pocket as equity in the home.
That equity can return to you as cash when you sell your home or refinance it, and it can be used to create leverage for getting loans to buy new property. The more homes you own, the more equity you can build, especially with the help of reliable tenants, property appreciations, and improvements.
Real Estate Investing Creates Leverage
Leverage exists when you can magnify a return on investment through strategically acquired debt that allows you to own more than you pay. In the case of purchasing a home, you can usually pay 20% or less down to take control of 100% of the home. To understand this principle, let’s look at a pair of examples:
Example 1: 20% Down (Leverage)
For example one, you use the money of your own to place 20% down on a $500,000 home, so you are invested for $100,000. When you sell the home, you will be able to sell it for the full amount, plus an appreciation accrued and all without needing to supply the full amount for ownership. Let’s say that in one year, the home has appreciated 5% to a total resale value of $525,000. When you sell and pay off the loan principal, you will receive back your down payment or $100,000 plus the appreciated $25,000 (less closing costs, etc.). So, you will have used leverage to magnify your return to 25%.
Example 2: 100% Down (No Leverage)
Let’s use the same down payment, but assume that you are purchasing a home outright. You have $100,000 invested in owning 100% of a $100,000 home. The market appreciates 5% in year one. If you sell, you will only see a return of 5% (less any fees paid, etc.).
As you can see, the same amount of money invested can do much better for you when leverage is used the right way.
Investment in Real Estate Can Improve Your Cash Flow
Making the right kinds of real estate investments can help you increase your cash flow. Whether you are flipping houses or acquiring rental properties that generate a net income for you above their mortgage and maintenance costs, reliable cash flow is one of the greatest benefits of investing in real estate.
Investment in Property Can Help You Hedge Against Inflation
Unlike many forms of investments that you can put your hard-earned money into, real estate is pretty stable against inflation. While other, non-concrete assets can see diminishing returns as inflation outstrips annual return percentage (as is common with most simple savings accounts these days), housing values tend to grow along with inflation, reducing the chances that inflation deeply impacts your financial strategies over the long run.
Real Estate Investment Is An Ideal Way To Work For Yourself
Many Americans want to work for themselves, they just don’t know how to do it. Business loans are much harder to get than mortgage loans are, making real estate investment a great option. Furthermore, real estate investment can be done as a side hustle when you’re getting started and avoids the pitfalls of needing to constantly improve a service or product offering to stay competitive in the marketer. People will always need a place to live in.
Enjoy The Benefits of Real Estate Investing With Real Estate 360 Pro
Real Estate 360 Pro in Atlanta offers education, coaching, and resources for getting the best start possible with your real state investing future. Get in touch today to learn more about us, or to begin your real estate investment education.