Diversifying your investments is important when building your portfolio. When you diversify your portfolio, it helps protect you against huge losses if a company doesn’t do well. Investing in real estate allows you to still earn money even if other investments didn’t perform well. Real estate investing is another way you can spread out your money beyond bonds, equities, and commodities. Read on to learn more about why you should invest in real estate and how it can benefit you.
Typically, most investors don’t invest in real estate directly because it can be expensive and time-consuming. This can be true if you chose to invest and rent out residential or commercial properties. It would mean that you would have to be the landlord and handle all aspects of managing the property. It takes a lot of work and knowledge to invest in residential and commercial properties. However, there is another option that is less money and time spent on your part. Real estate investment trusts (REIT) earn money from the income that is produced from properties without having to buy or manage the property itself.
REITs allow any individual to invest in properties, even if they couldn’t buy the property itself. Most REITs are traded like stocks on the public market and they give investors experience in the real estate industry. You can regularly earn income from REITs because they are required to pay 90% of their annual taxable income to their shareholders. You can also invest in commercial properties or flip houses for a profit.
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Benefits of Real Estate Investing
There are a variety of benefits that come from investing in real estate. Here are a few ways that investing in real estate can be beneficial to your portfolio.
- Real estate appreciation happens naturally, but you can also play a part to increase the value of the property. Some renovations and repairs can help the value of the property go up. Ask a real estate agent what renovations bring up the value of a property.
- Tax write-offs should be taken advantage of when you invest in real estate. If you own a home and rent it out, it is considered a business. Tax write-offs can include mortgage interest paid, maintenance, real estate taxes, and much more.
- You can leverage your real estate investment. Leverage is when you use debt to increase the return of an investment. Very few investments allow you to invest in something that is beyond what you can afford by making payments. Over time, you will have a higher stake in the investment because you are paying the mortgage.
You can invest in real estate by buying REITs, renting out residential or commercial properties, or flipping houses for a profit. This can also help you diversify your portfolio instead of putting all your money in the same place.
If you are interested in investing in real estate, schedule a 1:1 demo with STRATAFOLIO. STRATAFOLIO helps you organize your real estate assets and helps you find patterns in your investment portfolio.
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