The importance of diversifying your investment portfolio cannot be overstated. In a blink of an eye, you could suffer a total loss if you put all your eggs in one basket. If you invest some money in the stock market, some in bonds or ETFs, and some in real estate, you will increase your earnings and reduce your losses. Investing in real estate as a first home buyer in Sydney is often avoided by many people due to their fear or belief that they require a lot of money. Both are wrong, and here are eight reasons why you should invest in real estate. You're about to undertake one of the greatest investments of your life if you're thinking of investing in real estate. Even if you have never invested in real estate before, here are the top reasons to do so.
Leveraging the Investment
Other investments do not provide the opportunity to invest in assets worth much more than they cost. You can usually buy only $10,000 worth of stock if you have $10,000 to invest in the stock market. Investing on margin (borrowing) is an exception, but you must be an accredited investor and have a high net worth. By investing in real estate as a first home buyer in Sydney, you can put down just a fraction of the home's price. Let's say you find a home for $100,000; if you put down $10,000, you might be able to find a loan to finance the rest of the purchase price as long as you are financially stable and have good credit. By doing so, you own the asset after investing just 10% of its value. With time, you will hold more of the investment as the mortgage is paid down, increasing your rate of return as well as the appreciation of real estate over time.
The Yearly Appreciation
In contrast to stocks or bonds, you can expect the value of real estate to increase as a first home buyer in Sydney. It might sound strange, but it works. Knowing that real estate appreciates naturally is the first step. You don't have to do anything except maintain your home for real estate to appreciate 3% - 5% a year. Renovating or repairing the house can, however, increase its appreciation rate. You should consult a licensed appraiser or real estate agent if you're planning renovations to increase the value of your home. They can help you determine the best (most valuable) renovations.
Renovations won't give you a dollar-for-dollar return, but some can return 80% - 90% of the investment. Also, you don't have to do major renovations being a first home buyer in Sydney. Even minor kitchen and bathroom improvements can have a dramatic effect on a home's value. Of course, adding a room or finishing the basement will add more value than simple cosmetic improvements.
The Tax Benefits
A real estate investor can benefit from many tax write-offs like any business owner. But even though you're investing in a home, you're running a business when you rent it out. You should always check with your tax advisor before assuming you can deduct expenses, but investing in real estate is a good idea. A capital loss can only be written off when you sell your stocks or bonds for less than you paid for them.
A Regular Cash Flow
Owning real estate and renting it out allows you to earn monthly income, which increases the profits from owning it since you are not relying on only appreciation. Buying investment real estate can seem overwhelming, but there are many resources available to help you find good tenants and manage your property. It is a great resource to use Roofstock Marketplace. In addition to listing investment properties for sale, many of the properties already have tenants on lease. You become a landlord as soon as you buy the house. Additionally, Roofstock conducts plenty of due diligence for you, so that all you have to do is choose the best property for you. Every investment comes with a risk, including tenants defaulting on their rent or vacating the home early. If there are no risks, there can be no rewards.
Financial Security
Investing in the market doesn't provide much security. However, as the year 2020 demonstrated, anything can happen in a flash. The next thing you know, you've lost everything you had invested in. Real estate is an asset that appreciates over time, so you know you're investing in a long-term asset. Even though it may go through some ups and downs, housing generally bounces back when you keep it for a while. Retirement income is often supplemented by real estate investments. You can increase your retirement income by owning a property, earning rental income when you're retired, or selling a property you've owned for many years once you're retired. Some people prefer to leave their money liquid in a cash account or invest it in the stock market, knowing their money is safe in a safe investment (real estate).
The Diversity
There are many ways to invest in real estate if buying and renting real estate is too stressful for you.
- Invest in a property that is undervalued, fix it up, and resell it (fix and flip)
- Serve as a middleman between motivated sellers and a network of buyers as a wholesaler.
- House hacking is the method of buying a 1 - 4 unit property, living in one unit, and renting out the others to pay off your mortgage.
- I suggest investing in REITs.
It is also possible to pass real estate down through the generations. Even if you don't want to go cash, passing along real estate can be even better if you want to leave a legacy behind. In addition to providing your heirs with an income-producing asset, it will also appreciate over time. It is therefore either possible to keep the property and continue the legacy or to sell it for profit.
Your equity can be used to increase your portfolio of real estate. Growing your real estate portfolio is a favorite way to use the equity of an investment property. Consider the case of $50,000 equity in a house. Your next property could be used as a down payment if you refinance the mortgage on the current one. According to the value of your properties, you may even be able to purchase future properties with cash, increasing your portfolio and equity faster still.
How to Determine Whether a Property is a Good Investment?
Everybody wants to know what property is the best to invest in to make the most money - the magic answer. Investing in real estate doesn't have a one-size-fits-all solution, but you should keep an eye out for these characteristics:
- Consider a neighborhood that's appealing to renters or one that's rapidly appreciating.
- Make sure the neighborhood offers all the amenities and conveniences homebuyers desire.
- Investigate crime rates, school ratings, and tax history in the area.
- 1 unit, townhome, condo, etc.) that renters in the area want.
- See how the average sales price today compares to historical prices by viewing the prices of recently sold homes.
As the CRE industry continues to change, technology takes on a more important role.
Real estate investment software can help companies adapt and overcome market shifts.
