Have you been thinking about investing in Real Estate but don’t know if it’s a smart investment to make for your portfolio? You’re not alone.
Although Real Estate has been a strong place to invest for the last 4 years many people are still sitting on the fence deciding if they should but their first rental property when the right time has already arrived.
Stop what you’re doing, read this article and learn 8 reasons why you should get started with investing in Real Estate in Houston or elsewhere across the United States right now.
1. Positive cash flow.
One of the biggest benefits to income producing real estate investments is that leases generally secure the assets. This provides a regular income stream that is significantly higher than the typical stock dividend yields.
2. Using leverage to multiply asset value.
Another important characteristic of commercial real estate investing is the ability to place debt on the asset, which is several times the original equity. This allows you to buy more assets with less money and significantly multiply asset value and increase equity as the loans are paid down.
3. Low-cost debt leveraged to multiply cash flow.
Placing “positive leverage” on an asset allows for investors to effectively increase positive cash flow from operations by borrowing money at a lower cost than the property pays out. For example, if a property generating a 6 prcent cash-on-cash return were to have debt placed on it at 4 percent, the investors would be paid 6 percent on the equity portion and approximately 2 percent on the money borrowed, thereby leveraging debt.
4. Hedge on inflation.
For each dollar that is created, there is a corresponding liability. Real estate investments have historically shown the highest correlation to inflation when compared to other asset classes, such as the S&P 500, 10-year Treasury notes and corporate bonds.
As countries around the world continue to print money to spur economic growth, it is important to recognize the benefits of owning income producing real estate as a hedge against inflation. Generally speaking, when inflation occurs, the price of real estate, particularly multi-tenant assets that have a high ratio of labor and replacement costs, will also rise.
5. Capitalize on the physical assets.
Income-producing real estate is one of the few investment classes that, as a hard asset, has meaningful value. The property’s land has value, as does the structure itself, and the income it produces has value to future investors. Income producing real estate investments do not have red and green days, as does the stock market.
6. Maximizing tax benefits.
The US Tax Code benefits real estate owners in a number of ways, including unlimited mortgage interest deductions and depreciation accelerations that can shield a portion of the positive cash flow generated and paid out to investors. At the time of sale, IRS allows investors a 1031 provision, allowing investors to exchange into a like-kind instrument and defer all taxable gains into the future. (See your tax advisor for full explanation.)
7. Asset value appreciation.
Over time, more and more inflation has made it into the economy, drastically reducing purchasing power. However, income producing real estate investments have historically provided excellent appreciation in value that meet and exceed other investment types. Properties historically increase in value as the net operating income of the property improves through rent increases and more effective management of the asset.
Get Houston Texas Property Management
Once you buy your first rental properties you owe it to yourself to get started with Houston Texas Property Management because, property management will save you the time, money and hassle of having to manage your rental properties yourself and best of all you will be able to devote more time to growing your investment portfolio.
Learn more about the affordable property management services we can offer you by calling us at (832) 498-0016 or click here to connect with us online.