Why Real Estate Property Is the Best Option for Cash Investment
“Real estate is a bad investment.”
“Buying an investment property is a financial suicide!”
You’ve probably heard these answers to the question “Should I invest in real estate property?”
These sentiments are clouded by the memories of the 2008 US housing crisis, which is likely to be served as evidence to back them up. The truth is that a real estate property can be the best option for a cash investment. Becoming a real estate investor is the best decision you can make to get the most out of your cash investment. Here are the best reasons to invest in real estate.
Make Money on a Cash Investment… Sooner Rather Than Later
With other forms of a cash investment, investors have to wait to sell in order to start making money. Becoming a real estate investor of rental properties means making money almost immediately. With some rental properties, like a turnkey investment property, real estate investors can receive rental income in the first month!
Even when buying an investment property in the traditional way, after some time for renovations and finding tenants, you can generate rental income in a short time. No other cash investment will offer this kind of cash flow immediately.
Control the Risk of a Real Estate Property
Many people hesitate to put a cash investment in a real estate property because it’s risky. Any cash investment will have some kind of risk, but a real estate investment is a relatively low risk. The beauty of buying an investment property is that real estate investors make all the decisions to ensure that it is a low-risk cash investment. All of the elements that make an income property risky can be studied beforehand by real estate market analysis and investment property analysis:
- Location in a stable or thriving real estate market
- Income property condition and cost of repairs
- Potential for generating income and positive cash flow (rental income and appreciation)
- Real estate market value
- Return on investment
Real estate investors can use all of this information to find a real estate property that will make for a low-risk cash investment. Mashvisor can make it easier to determine if a real estate investment is a good option for your cash investment. Use Mashvisor’s property finder along with Mashvisor’s investment property calculator to make sure you find a low-risk real estate property.
If an income property doesn’t have all of these elements, it can be manipulated and improved to become less of a risk (in some aspects).
Even the state of the real estate market is more stable and less volatile than, say, the stock market. There are simply more factors that are under the control of the real estate investor.
Use Mashvisor today to find and analyze an investment property.
Leverage the Money of Others
Whether the financing for rental properties comes from banks, real estate syndication, real estate crowdfunding, or even owner financing, real estate investors can leverage the money of others to get a much better return on investment. For example, a typical mortgage loan for an income property is about 80%. If the real estate property is priced at $200,000, that leaves a $40,000 cash investment from the real estate investor. Now, for the sake of the example, if the real estate property was sold right away for $220,000, the profit would be $20,000. The real estate investor would have essentially made a 50% return on the cash investment. Having paid a full cash investment of $200,000 and selling for the same price would amount to a 10% return on investment only!
Not only can real estate investors achieve a better return on investment, but this makes buying an investment property one of the more affordable options, allowing for a lower cash investment. For example, if a stock costs $200,000, an investor would need that exact sum to invest. For real estate property costing the same, real estate investors can have a cash investment of 20% for a down payment and use the rest from a mortgage loan.
Tax-Free Cash Flow
Making money in real estate can result in tax-free cash flow. Cash flow from other forms of a cash investment can be taxed, pretty heavily. Real estate investors who own rental propertiescan claim tax deductions such as:
- Depreciation of an income property
- Interest on financing for rental properties
- Investment property repairs
- Local and long-distance travel
- Home office
- Employees for a real estate business
- Insurance for an investment property
- Professional and legal services
Real estate investors also have the option to avoid capital gains tax when selling an investment property through the 1031 tax exchange. Essentially, all of the cash flow can be used to pay off the mortgage or go towards improving the income property for a great return on the cash investment.
Becoming a Real Estate Investor ≠ Becoming a Landlord
…or at least it doesn’t have to! One of the best reasons to invest in real estate is the potential to make passive income from this cash investment. It is often stated that rental propertiesbring the headache of being a landlord and can never generate passive income. For most, this is the major reason for not becoming a real estate investor.
There are plenty of real estate investment options that will bring in enough rental income and cash flow to pay for professional rental property management (multifamily homes for sale and other commercial real estate properties). Still, others have professional rental property management from the get-go (REIT investing, a turnkey investment property, real estate crowdfunding, real estate syndication, etc.). With any of these options, real estate investing brings in passive income for the real estate investor.
Sign up for Mashvisor to find an income property for real estate investing in 15 minutes.
With the right experience and professionals to assist, some successful real estate investors even manage to get close to passive income by being a landlord of low maintenance rental properties and tenants.
At the Very Least, Balance Your Investment Portfolio!
The possibilities of passive income, making money in real estate immediately, tax benefits, and a great return on investment still haven’t swayed you towards the world of real estate investing? Then at the very least know that a cash investment in a real estate property will bring balance to the risk in an investment portfolio. “Don’t put all of your eggs in one basket!”
Not only can you diversify the types of cash investment in a portfolio, but real estate investing has much diversity in itself. So many different kinds of rental properties, as well as methods of real estate investing, can offer great diversity to an investment portfolio. Take a look at the investment portfolio of successful investors and, sure enough, a real estate investment will be present!
The list of reasons to invest in real estate can go on for miles longer than this. Real estate investing is not a new, gimmicky concept that we’re trying to get you to sign up for. Rather, it’s one of the oldest ways of making money (dating back to the cave-dwelling days, no joke!). Look no further for a smart option for your cash investment. Visit Mashvisor now and become a successful real estate investor.