The recent housing marketing crash might have discouraged you from exploring real estate investments, but it’s still a valuable addition to your portfolio. It also serves as a nice addition to the money you’re earning though traditional IRAs and 401Ks. Still not convinced? Here are six reasons you should invest in real estate.
Real estate investments give you an incredible return and leverage on your capital. It’s also one of the few investments where banks are generous when approving your loan.
Grow Your Money Tax-Free
Appreciation over a long-term home investment is quite realistic as well as eligible for tax-deferral. In the future, you could consider a 1031 exchange, charitable trust or installment sale to decrease your tax liability even more.
Tax-Free Cash Flow
You read correctly. The majority of the time, investors will never pay taxes on their cash flow when it comes to real estate investments. This allows you to wait for capital gains on the sale of the property down the line.
There is a good chance your rental property will give you an overage of tax deductions you can use against your other income, depending on your level of income and classification as an active investor or real estate professional. Discuss this with a tax professional before investing to learn about your options.
Additional Tax Deductions
Rental real estate is a business, so traveling to check on your properties and payments to family members who manage your properties can be deductible. If you invest in a rental property, you will likely have the opportunity to convert these personal expenses into valid business deductions.
You might lack the self-discipline to deposit into your IRA or 401k every month, but a rental property is a huge investment that comes with a huge commitment to maintain. If you stick with it, you’ll reap the rewards of building long-term cash flow when you’re ready to retire.
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