4 Reasons Why Investing in Residential Real Estate Is a Smart Idea

Investing in residential real estate can be intimidating, but it is worth it in the end if you play your cards right. It can be difficult to get started or to work up the motivation to learn something new, but there are many positive reasons as to why you should invest. Here are four to get you started.

Expenses Are Tax-Deductible

Most expenses you incur when spending money on a property you rent out are tax-deductible. Here is a handy — but not completely exhaustive list — of the IRS explaining rental income, what you can deduct, and how to keep records of these expenses. “These expenses may include mortgage interest, property tax, operating expenses, depreciation, and repairs,” the website explains. Any action you take to keep your rental property in good, operating, and workable condition can be written off. Essentially, you can write off most repairs except for the money you spend on improvements.

This can be a great avenue if you have the capital to invest in real estate, but you are still trying to save money in order to invest it in other areas. Plus, the tax that you have to pay on real estate can be much lower than other income that is taxed.

Real Estate Generally Holds its Value and Will Appreciate Over Time

Property is valuable and will almost always be in demand — especially if you own it in a desirable location. Real estate property is a great place to invest your money because (generally speaking) as inflation happens, your property value will also increase. The money you invest in a property will grow and not depreciate in value. While this is not foolproof, it is one of the safer methods of investing your hard-earned dollars.

However, make sure you are choosing a property that is located in an area that experiences demand. You will earn significantly less money buying property in a vacant area than if you buy a property where there is a lot of people and demand.

You Receive Income Every Month From Tenants

While this is mostly self-explanatory, it is important to not underestimate the value of having a source of steady, (mostly) passive income. This money, depending on the amount, can cover a variety of your own expenses including your mortgage payments. It can be extremely freeing to not have to worry about certain bills because you know you will be able to cover them with the extra income generated by your rental property.

You Have a lot More Control

The stock market is highly volatile; you’re at the mercy of the market and its seemingly random whims. The housing market is infinitely more stable and has predictable highs and lows. Also, you are solely in charge of your own property. Do you want to rent it out? Go ahead. Make improvements? Demolish it? As long as you get the proper permits, the world is your oyster. You control your selection of tenants, the amount of rent you charge them, and any changes you wish to make.

Final Thoughts

Getting started in investing in real estate can be intimidating, but there are many positive reasons why you should consider this avenue of investment if you have the capital to do so. The returns can be extremely high and benefit multiple parts of your life. As always, be sure to consult a professional if you have any questions.