Five Key Benefits of Purchasing and Owning Real Estate Properties

Estimated Time to Read: 3 minutes

Do you think that owning a real estate property is a tough investment and wouldn’t provide you short term returns?

Well, then there is a possibility that you have a false notion. You might want to ask a question to yourself as to why you would want to purchase or invest in a real estate property at all?

The real estate business is far more profit inducing than any other business. In this article, we tell you 5 important benefits that owning or purchasing real estate propertiesFive Key Benefits of Purchasing and Owning Real Estate Properties has got for you.

1) Great income opportunity

The property you have invested in will definitely get you incomes from the rents that you will receive every month. There are possibilities wherein your property might be vacant, but the condition is very rare.

However, you need to be aware of the fact that, as a beginning investor, you might be taken away with exaggerated assumptions and not being wary of the potential costs.

During the initial years of real estate, the prices may get too high and the rents might not increase in proportion to the price of the property.

A lot of investors with false assumptions that appreciation in the prices would subside, went through negative cash flow. Hence, you got to be prudent in forecasting a positive flow of cash, and work accordingly.

2) Depreciation helps

While you are investing in the real estate, you will be enabled to use the depreciation of the property for tax benefits of your own. Depreciation is basically a method of non-cost accounting to consider the financial burden altogether, which is incurred by investing in real estate.

In simple terms, there is depreciation in the value of your brand new car the very moment you drive it away from the showroom. When you invest in a real estate property, the IRS lets you deduct the amount of depreciation against the taxes you pay yearly.

The depreciated value of a real estate property such as the ones is gated communities like Lake of the Woods Virginia or Brentwood Country Estates Los Angeles is decided on the basis of the property structure and its duration of existence. Through this depreciation, you can turn an asset that is generating you positive cash flow, into an asset that shows loss on the papers when you deal with the taxes and IRS.

3) Expenses are deductible

Usually the expenses you bear pertaining to the property are deductible when your investment property comes into the picture. The money you spend on utilities, mortgage, insurance, the property taxes you pay and also the interest.

If you are developing the property yourself or if you are using a property manager, you can make all of this deductible. Investments in real estate are always accompanied with lots of responsibilities, duties and expenses.

Due to this, the expenses are deductible for the personal benefit or the landowners and real estate investors. This allowance is provided by the contemporary tax law.

If you ever incurred loss in an investment, that loss (expense) is allowed to be carried over for many years against your income taxes. This can be a great technical and aggressive strategy, but is worth it.

4) Appreciation

Appreciation actually means the increase in the value of an underlying investment. This is one of the prominent reasons you should invest in the real estate (http://www.investopedia.com/articles/pf/06/realestateinvest.asp). It is also a great way to increase your net worth.

As the area in which the property is develops, the popularity and the demand increase consequently. This is what appreciation is about. There is no other investment that can provide you with such returns without increasing the risks of loss.

One of the best benefits of this is that you will actually be getting paid for living in your own property. Your mortgage will be taken care of, and also generates you income every month throughout the time you own the property.

5) Leveraging

This is often addressed as other people’s money. This happens when you are spending very little money on controlling a considerably expensive property. You will be effectively leveraging the down payment and obtain control over the asset you wouldn’t have purchased without the loan.

It is openly acceptable in the world of real estate and is comparatively less risky than the leverage in the stock market. If not, people would only purchase properties if they had full cash ready with them to make the purchase.

So, when do you plan to purchase a real estate?