Financial freedom has many avenues, each working for different people and situations. Real estate investing is one avenue to unlocking financial freedom and effectively mitigating a volatile stock market. So, how can real estate investing unlock that sense of financial freedom? Keep reading to learn about the different ways real estate investing can provide a solid foundation for your financial future.
Key Takeaways
- Real estate investing offers a steady stream of passive income that can help investors build wealth over time.
- Investing in real estate has many tax benefits that can help investors save even more when it comes to building their wealth.
- This type of investing offers investors more control over their investment portfolio, allowing them to control rental prices, tenant screening activities, and property upgrades.
- Real estate investments also enable investors to legacy plan their wealth by having an asset that can be passed on from generation to generation, offering financial stability and freedom in the future.
Passive Income Streams
Real estate investing offers a mostly hands-off passive income stream. If you opt to rent out your properties as a hands-on landlord, you might involve yourself more in the management of your properties. Flipping your properties or hiring a property management company can offer a more hands-off way of managing your passive income. Here are some benefits of this passive income stream:
- Rental income: By investing in rental properties, you generate a steady stream of income. As you expand your portfolio, this income can surpass your monthly expenses, leading to true financial independence.
- Appreciation: Over time, real estate properties generally appreciate. This means that you earn from monthly rent and benefit from the increasing value of your assets.
Leverage
Real estate is one of the few investment avenues where you can leverage your assets to your advantage. With a small down payment, which can range from 5% to 30% of the property cost, you can control a much larger asset. This is due to financing options, such as mortgages, which enable you to use a larger institution’s financial assets to finance the rest of the property price. As a result, you pay off the financial institution over a set period (for example, over 20 or 30 years).
This means higher returns on your initial investment over the longer run, which maximizes your potential gains in the market.
Tax Benefits
Real estate also offers several unique tax benefits that make property investments more appealing than other long-term financial assets. These include:
- Depreciation: When you invest money into purchasing a property and improving it, you can deduct these expenses over the course of the property’s useful life.
- Mortgage interest: When it comes to tax season, you can deduct the interest you pay on a mortgage for a rental property from your income.
- Capital gains: If you hold onto a property for more than a year, you benefit from reduced tax rates on your profits when you sell. These reduced tax rates might mean you pay from 0% to 20% on the profits you earn from a property sale rather than the typical tax rate you fall under if you hold the asset for a year or less.
Diversification
Diversifying your investment portfolio is probably advice you’ve seen time and time again. Real estate investing can help you better navigate a highly volatile market. Since real estate is a tangible asset that provides another layer of protection in the market, it adds diversification to your investment portfolio. It’s a great way to hedge against inflation and economic downturns, as you can reliably account for tenants paying their rent on a recurring basis.
Control
Unlike stocks or bonds, where you’re at the mercy of market fluctuations, real estate gives you more control over your investment. There are many ways you can influence the value of your property. For example, renovating a property, updating the interior, or building new additions, such as a pool or extra room, can significantly add to a property’s value.
Another way to control your real estate investment is through tenant screening. This can help you find reliable tenants who won’t damage your property and will pay your rental prices month after month, providing a reliable source of income.
A final control method is the fact that you set the rental price. You can place the price point where you deem it fits. Conduct market research to determine a fair market rental price for your property to ensure that you attract interested tenants. Some factors to consider are location, property information, amenities, and comparable properties.
Building Equity
Every mortgage payment you make reduces the principal amount. The principal amount is the initial money you borrow when you get a new property loan. As you reduce the principal amount you owe on a property, you increase your equity. Over time, this equity buildup can be substantial, providing you with a significant financial cushion. Some also reinvest this cushion as property upgrades, which can boost the property’s value when it comes to selling.
Legacy
If you want to secure financial security for your family in the future, real estate is a tangible asset that you can pass down to future generations. It’s a way of ensuring that your loved ones are taken care of and have a solid financial foundation. It can afford them a stream of passive revenue if they opt to keep the property or provide them with a relatively fast way to make a profit from selling the property.
How To Invest in Real Estate
Now that you know the benefits of investing in real estate, you may wonder how to start your real estate investment journey. While each scenario will differ based on your finances, tolerance for risk, and the local market, there are a few ways to enter the real estate investment market.
Invest in Real Estate Investment Trusts
Investing in publicly traded REITs can afford you a steady stream of income without needing to be the landlord yourself. This method allows you to contribute to a trust that companies then use to invest in commercial real estate, such as office buildings, retail spaces, and hotels.
Search for Potential Rental Properties
Some real estate investors buy a property that enables them to live in one portion of the residence while renting out the rest. These properties often share common areas, such as a kitchen or living room. This can help you repay your mortgage faster, generate a passive income, and make connections.
Use an Online Investing Platform
Finding an online investing platform specifically for real estate investments connects real estate investors (you) to real estate developers. This provides you with monthly or quarterly distributions in exchange for an initial investment to fund the real estate development project. While many platforms only accept those with a significant income or net worth, some have more flexible investor requirements.
Ready To Start Your Real Estate Investing Journey?
Real estate is a great avenue for generating passive income that affords you a sense of financial freedom. It can help you generate wealth and prepare for retirement or assist in financial legacy planning. Since knowledge is power, researching all you can and securing high-quality real estate investing advice is key to growing your real estate investment portfolio.
Becoming an Infinity Investing member provides you with that knowledge. You can partake in on-demand training sessions, strategy sessions, and weekly stock rooms, where you learn strategies and methods to help you grow your nest egg into something that affords you financial stability. Become a member today to get started on building your wealth.
