The Benefits of Investing in Real Estate

Investing in real estate is a stable way to build long term wealth. This is why it attracts so many investors. The latest figures from the Canadian Real Estate Association (CREA) indicate that average residential real estate sales rose by 56% in May 2020. This is a testament to the stability of the housing market despite the current economic uncertainties.

If you are still debating whether investing in real estate is the right move, keep reading to find out the benefits.

1. Tax breaks

One of the advantages of investing in real estate is that you can take advantage of tax breaks. The cost of running, owning, and managing a property can often be deducted during taxation. This helps in reducing costs and maximizing profit.

In Canada, investment property owners must remit 25% of the rental income by filling the NR6 form. This only applies if you made a profit. However, if you incurred a loss, you are allowed to reclaim previously paid taxes. In addition to capital and operating expenses, equipment and furniture costs can also be deducted under capital cost allowance.

2. Constant Cashflow

Paying your mortgage on an investment property is relatively easy. The monthly rental income can be used to settle any mortgage payments. On completion, the investor owns all the assets of the property. The passive income makes it easy to maintain cash flow without any problems.

In a way, it's the renters who pay your mortgage for you. You will continue earning rental income for the rest of your life. Of course, you will also need to make sure your tenants are happy. You can use any excess to reinvest in the property or go towards your savings.

3. Property Value Appreciates

The land is one of the few assets that rarely depreciate. The value of the land the property sits on will continue to increase in value. This makes investing in real estate relatively safe compared to other options such as stocks.

This means you can buy a piece of property and let it sit on for a few years. You will sell it for profit even if you didn't do anything on it. The longer you wait, the higher the profits. This is why real estate is a long term investment.

4. Hedge Against Inflation

Inflation refers to the reduction in the purchasing power of money. An increase in inflation affects all other forms of investments. Fortunately, for commercial real estate investors, this is not necessarily bad news. As the cost of living goes up, so does the rent.

On the other hand, if you invested in stock, inflation would mean you need to spend more money to acquire the same shares. Since real estate value increases proportionally to the level of inflation, it protects investors from losses.

5. Portfolio Diversification

Even if real estate is not your primary form of investment, it is still a great addition to your portfolio. Tangible assets offer a certain level of security. It counteracts the volatility of other types of investments like bonds or stocks. Should anything happen to them, you will have your real estate investment.

Real estate also offers you the chance to invest in your community by providing quality housing. This can help spur economic growth in the area and uplift the locals. If you are wondering where to start, do a simple Google search such as “Calgary homes for sale” to help narrow things down and provide you the opportunity to diversify.

6. Easier to Finance

It is much easier to secure funding for real estate development than any other form of investment. This is mainly due to the relative stability of the real estate market. Should you default on your payment, the bank can quickly recover their loan by selling the property. Banks offer many products geared toward real estate development. For instance, with commercial real estate mortgages, you only need to have a fraction of the capital. Banks offer a minimum of 75% funding. This ready funding is not available for other forms of investment. You might need to take a personal loan to buy stocks or bonds.

Bottom Line

Hopefully, you are convinced that real estate is the best place to invest your money. In addition to the real estate market's stability, you also get to have full control of your property. You get to decide what kind of tenants to accept, and what company to manage the property. There is a reason wealthy people eventually get into real estate. Join this elite group of entrepreneurs and reap the rewards.