If one were to inquire about the potential happiness of their parents or grandparents today had they purchased properties a few decades or even just a few years ago, it is highly probable that the majority would respond affirmatively. They would likely express their desire to have acquired those properties due to the escalating values observed in today’s market. Now, consider pondering the same question, as it is highly likely that your own grandchildren will pose it to you someday. Endeavor to avoid becoming the person who laments, “we should have bought.”
Instead, invest now to reap the long-term rewards…
There are many self-made millionaires who have created wealth from real estate. Real estate is the foundational source of wealth. Obviously, there are risks with real estate, just like any other investment.
Let’s understand 6 primary benefits of investing in real estate:
- CAPITAL GROWTH
If you buy well and give due consideration to the location, there is a very high probability of Capital growth. This is called appreciation, which creates wealth for people. - YIELD
This means rent. If you are able to lease out your property, you realise that as the cost of living increases, it increases the rent. This, over a period of time, creates passive income source. - TAXATION BENEFIT
If you own real estate assets and incur expenses of holding that asset, and if you end up producing a net loss with those expenses, that loss can be offset against your payable income tax. This creates the tax benefits. Also, if you own real estate in the right ownership structures, e.g., in the name of trusts and companies, they can distribute the income from that asset in the most tax-effective manner. Another way of getting tax benefits is by claiming depreciation. - FORCED APPRECIATION
To be able to manufacture additional capital growth. This can be done by making improvements to the property- cosmetic level renovation or structural improvements. This helps not just in improving the capital value of your asset but also in attracting higher rentals. - LEVERAGE ADVANTAGE
Some of the smart investors put all their capital into buying real estate. They put enough to have a deposit, and the rest is borrowed from Banks. Now, with this purchase, the value of the asset appreciates on its full amount, including both components. This is how smart investors boost their wealth and accelerate their financial success. - FANTASTIC INTER-GENERATIONAL WEALTH ASSET
We find that people who are wealthy and are from second and third generations are majorly because their ancestors decided to pass on their real estate assets to the next generation. Over a long period, especially over 20-30 years, the real estate asset can grow significantly and create long-lasting wealth intergenerationally.
Though this all sounds so interesting on the surface, the fact is that real estate carries its own set of risks aswell. You need to be smart and savvy, you need to know your numbers, you need to know how lending works, and you need to have your emergency funds in order, and you need to do your research well to buy the real estate!