Here are 4 potential benefits of diversifying your investment portfolio – small or large – into real estate. 1. Appreciation. While every market is different, home values have historically appreciated approximately 4% annually. In the last several years, we’ve seen higher levels. Real estate is a leveraged investment which means you put a little down and borrow the rest. Yet you realize appreciation on the total value of the home; not just the cash you put down to purchase it. Using this scenario, if you put 20% down on a $200,000 home, that $40,000 investment returns $8,000 a year in appreciated value. That’s a 20% return. Not bad. 2. Tax benefits. Your tax advisor can help determine eligible tax deductions on an investment property, which generally include mortgage interest, property taxes, depreciation and costs like repairs and maintenance. Reducing your financial gains reduces your tax liability which means a better net outcome. 3. Tenant-paid mortgage. The rental payments you receive go towards the principle and interest on your loan. As your mortgage balance is reduced, you build up equity in the property to cash out when it’s time to sell. Plus, you may be able to borrow against the home to buy another property. 4. Cash flow. Depending on the property and management expenses, you can quickly generate positive cash flow from the rent you charge. Not only does someone else pay your mortgage, but you can earn income while they are doing it. Even with the recent uptick of mortgage interest rates, real estate provides steady appreciation and is usually an excellent investment opportunity. If you’re thinking about investing in real estate, I’d love to help evaluate investment properties that fit your financial goals. Never want to miss a post? For more useful real estate tips & tricks, subscribe to my mailing list or contact me with any real estate questions.
Kat Medaries, REALTOR® Long & Foster Real Estate, Village of Midlothian Sales Licensed to sell in the Commonwealth of VA / Equal Housing Opportunity For informational purposes only. Not intended as legal, financial or credit counseling advice. Seek the assistance of a professional should you require.
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