Benefits of Real Estate
Real estate is an important asset class that should be found in all investment portfolios. Some benefits include:
1. Cash Flow: Real estate generates cash flow, which is the cash remaining after all expenses are paid.
2. Appreciation: The value of real estate may increase over time.
3. Loan Amortization: Equity increases as the principal of a mortgage loan is paid.
4. Tax Benefits: There are numerous tax benefits available to real estate investors such as the mortgage interest deduction, depreciation and 1031 Exchanges.
5. Diversification: Real estate has historically performed differently than other major asset classes.
6. Leverage: Financing is readily available since real estate is a tangible asset that can be served as collateral. Leverage allows investors to increase their potential returns.
7. Inflation Hedge: Real estate has historically proven to be a good hedge against inflation. Owners can increase rents as property values rise during inflationary periods.
8. Control: Investors have the option to manage and take charge of the decision-making process to determine their own financial results.
9. Community Impact: Investors have the opportunity to make positive impacts on communities and stimulate local economies.