For a potential investor, there are many property investment options available. These options vary in the rate of return and the degree of risk involved. Property has long been a favorite for investors wishing to grow their wealth and it’s easy to see why.
There are countless reasons for property being a sound investment for a potential investor – here are 5 of the most important ones:
1. Inflation hedge
Every investor looks for a way to hedge their wealth against inflation. They want to make sure that their investment is not affected by a decrease in the value of money over time. Property values increase annually by at least the rate of inflation which makes owning property a very attractive option for risk-averse investors.
2. Positive cash flow
As an investor in a rental property, a lease that generates rental income from the investment property every month can help to secure the finance required for an asset of this size. Affordability is not based purely on active income generated through employment.
3. Financial leverage
Owning an asset such as commercial property can serve as leverage for other financial transactions. An investor can accumulate several other assets by securing them against the property.
4. Added Value
Real estate is unique in that it offers value on more than just one level. The physical structure has worth and so does the land it is built on. In addition to this, the income potential of the property in the form of rental is another value-add.
5. Tax reductions
The Internal Revenue Service (IRS) makes provision for offsetting some of the costs of owning a rental property against tax payable on the rental income received. Expenses such as depreciation, interest and maintenance costs are considered valid expenses to include in the investor’s tax return calculation.
In the current socio-economic climate, millennials are not buying properties. Instead of settling down and purchasing a family home, these young adults are either still staying with their parents or sharing a living space with several other young people. They need to rent these spaces and so the demand for rental properties is ever increasing.
With the technology available today, managing a rental property is easier than it has ever been before. A landlord can outsource the management of his/her rental property to a third party or they can choose to handle this themselves. Advertising rental properties on the internet is simple, efficient and convenient. Properties don’t stay vacant for long as prospective tenants can view the property online and sign leases electronically. The landlord can collect rental payments through online banking and pay expenses associated with the property in the same way.
When you consider your options in terms of investment instruments, it becomes very clear that property is you surest way to realizing significant financial growth.