6 Reasons Why Investing in Real Estate is one of the Best Ways to Build Wealth
Investing in real estate remains one of the best ways to build wealth in the long term.
The sooner you start investing in property, the sooner you can start building up your portfolio.
The main reason why real estate investments are great for building wealth is that the real estate market is less volatile than the stock market.
It is also relatively easy for almost anyone to invest in property as long as they can afford to get a home loan from a financial institution.
There are many reasons why investing in real estate can be financially beneficial for anyone despite their age, gender, or occupation.
Here is a comprehensive breakdown.
1) Build wealth by accessing cash from your properties
If you make smart investments in real estate, it can help generate cash flow.
Over the long term, this can happen when you eventually pay off your mortgage and sell the house at a profit.
In the short term, it happens when you buy a property and convert it into a rental unit.
It offers a more stable form of passive income than you would receive by investing in stocks or other businesses.
You can also turn this into your preferred mode of income once you have established your real estate portfolio. Many investors buy and sell homes at a profit or buy and lease rental units.
2) Appreciation helps to build wealth
What makes real estate investment so unique is that it generally appreciates over time.
The more time goes by, the more valuable the property becomes.
By the time you have paid off your mortgage and you are ready to sell, you can make quite a big profit off of it.
This is also very important to note when saving up for a nest egg. According to statistics, more than 90% of South Africans cannot afford to maintain their standard of living when they retire.
What is even more alarming is that two-thirds of retirees have less than R50 000 saved up in their retirement funds.
Property investment is the best way to ensure that you are well-taken care of during your golden years.
3) You can claim tax
When you invest in real estate to lease it, you are classified as a real estate operator.
Real estate operators can deduct items over time as business write-offs.
These items include things like interest and maintenance.
So next time you submit your tax return, you might get a little something back just because you are a property investor!
4) You have leverage that can help build wealth
Owning property means that you have equity.
Equity is the difference between the amount you owe on the mortgage and the value of your house.
If you consistently pay off your mortgage, you can tap into that equity if you really need extra cash.
Equity can work even better in your favour if you own several properties or rental units. It means that you have cash available at any time.
5) Tenants can help you pay off your bond
The biggest advantage of owning rental units is that you are not paying back the bond yourself.
Your tenants are doing it for you.
When you own property that you are leasing, the property essentially becomes like a savings account.
You are spending nothing on the mortgage and you can make a small profit as well.
It is the smartest way to invest when owning property because you don't have to do any of the work!
6) Inflation is your biggest advantage
Inflation is a word that many people dislike but as a real estate investor, it can be your biggest advantage.
Every time inflation increases so does your rental income as well as the value of your home.
This means that when the cost of living goes up, so does your cash flow.
It is the perfect way to further build wealth.
Final thoughts
Even though the South African economy has taken a bit of a nosedive in the past few years, investing in real estate is still the best way to build wealth.
Speak to an experienced real estate agent to get your real estate journey started as soon as possible.