The unemployment rate during the pandemic went up to its highest level since the 1930s or the time of the Great Depression. But the low-interest rates also encouraged people to buy homes in the middle of the health crisis. These rates, together with the economic stimulus from the government, allowed people to look for homes that fit their budgets.
Even as over a year has passed since the pandemic started, investing in real estate is still a good way for you to diversify your investment portfolio. It gives you another source of finds in case your other sources run dry due to movements in the market. Here are the other reasons why you should start investing in real estate.
Minimal Initial Investment
Real estate allows you to put in a fraction of the cost of your initial investment before you can own it. You only need to prepare funds for the down payment of a piece of land or house when you want to start investing in real estate. You can pay the remaining balance through a loan if you have a stable income and good credit.
For instance, you can pay $10,000 as a down payment for a house that’s priced at $100,000. You can take out a loan for the rest of the amount. You have several financing options, including private and government loans. As you pay for the loan, your investment will appreciate, especially if the property is located in an area that many people want to live in.
Increase Its Value
You can also increase the value of your home without depending too much on the market. While the value of the real estate increases every year if you maintain the house, you can also increase the rate of the increase in its value through renovations.
Unlike bonds and stocks that rely mainly on market forces, you can enhance the home and increase its value without waiting for the market to do it for you. But you should work with an appraiser since not all renovations and enhancements can increase their value.
You can increase its usable space by adding a room or a deck. You can also enhance the basement and renovate the bathroom and kitchen. These enhancements can increase the value of your home. And at some point, you might think, “how can I sell my home quickly?” The renovations and upgrades you made will make the house appealing and will have a higher resale value.
Earn Monthly Income
If you are not keen on selling your home, you can also earn income if you rent it out. This is particularly true if you have a second home. In this situation, you rely on the property’s appreciation since you can earn a steady income from the property.
While looking for a quality renter and managing the property is challenging, you can get the services of a property management company to handle it for you. These companies have the resources to look for tenants, screen them, collect rent, and handle maintenance, among others. These companies can even handle any requests that the tenants may have. They can also handle issues with tenants, including late rent payments and the eviction process.
Be Financially Secure
Investing in the real estate market gives you the financial security that you may not get from other types of investments. Even if the market dips, it can also bounce back. For instance, home prices have increased recently. Median existing home prices have gone up compared to last year.
You can look forward to a higher value for your home, especially if you work on renovating it. Some people use real estate as a supplement to their retirement income. They sell their home once they retire. The resale value is typically higher compared to the price they bought the property.
With this, you can look forward to a bigger payout when you retire if you plan to sell your property in the future.
Take Advantage of Tax Benefits
When you rent out your home, you need to pay tax on rental income. But you also get several tax benefits from your investment. You can deduct some expenses from your tax return, including interest from mortgage payments, operating expenses or maintenance costs, property taxes, and depreciation.
You can also deduct the cost of acquiring materials and supplies necessary to ensure the property is in good operating condition. Additionally, you can deduct other necessary expenses, including insurance, advertising, and interest.
Investing in real estate is a good way for you to have extra income, especially during a health crisis. It also allows you to prepare for your retirement in the future.