Real Estate is arguably the best investment in the world. Income. Equity. Tax breaks. A hedge against inflation. The benefits that come with investing in real estate are enormous.

There can be some risk associated with investing in real estate, though. It's important to understand markets and how to choose properties that are going to grow in value over time. They don't always pay off, and if you invest poorly, you can lose money.

However, if you understand the risks, do your research and evaluate the benefits in detail, in can provide a nice source of income. Here are some of the biggest benefits and potential risks that come with it.

What is Real Estate Investing?

There are many ways to invest in real estate. You can buy a sing-family home, rent it to someone, and collect the monthly rent check. This can give you a nice source of income and also allow you to wait for the property value to rise. When it does, you can sell, making a profit, or you can cash-out the equity to purchase more real estate or make improvements. You can also buy commercial real estate and rent it to businesses.

If you want to leverage more time and money, you can invest in apartments, allowing you to multiply your profits.

The biggest thing is to research what type of real estate investing is the best fit for you.

REITs

Buying into REITs , short for real estate investment trusts, is one of the easiest ways to invest in real estate. Why? With a REIT, you invest in real estate without having to worry about maintaining or managing any physical buildings.

REITs are companies that own real estate, anything from retail properties to apartment buildings, hotels, offices or warehouses. When you buy into a REIT, you purchase a share of these properties. It's a bit like investing in a mutual fund, only instead of stocks, a REIT deals with real estate.

You can earn money from a REIT in two ways: First, REITs make regular dividend payments to investors. Secondly, if the value of the REIT increases, you can sell your investment for a profit.

You can invest in a REIT just as you would invest in a stock: REITs are listed on the major stock exchanges. The National Association of Real Estate Investment Trusts says that about 145 million U.S. residents are invested in REITs.

Residential Properties

Sinking your money into investment properties can also prove lucrative, though it does require some work. First you buy a residential property, either a single-family or multifamily building, and purchase it, usually financing this purchase with a mortgage loan.

You can then either live in the property or rent it out as you wait for it to appreciate in value. If you rent out the property, you might be able to use these monthly checks to cover all or part of your monthly mortgage payment. Once the property has appreciated enough in value, you can sell it for a big payday.

The challenge, of course, is that the property you purchase isn’t guaranteed to increase in value. You can lower the odds of a bad investment by researching local neighborhoods to find those in which home values tend to rise. You should also work with real estate agents and other professionals who can you show historic appreciation numbers for the communities you are targeting.

You will have to be mindful of location. A home on a busy street might be more affordable but might not appreciate as quickly as one located on a quiet side street. An apartment building located next to public transportation might see a quicker jump in value than one located miles away from the nearest commuter train station.

If you don’t want to take phone calls late at night from tenants complaining about furnaces that aren’t working or roofs that are leaking, you’ll have to pay a property management service. These services handle the daily work of maintaining and operating properties. They’ll also send repair technicians to properties that need emergency maintenance.

Commercial Properties

You can earn money by buying and investing in commercial properties much the same way you do by investing in residential real estate: First you buy your property. Then you charge monthly rents to tenants. If the property’s value rises, you can sell the commercial space for a hefty profit.

There are many types of commercial properties in which you can invest. You can purchase an office building and charge companies to rent space in that building. You can purchase strip centers or other retail properties and charge monthly rent to business owners. You can even purchase a warehouse and charge rent to manufacturing companies or retailers who need to store their products.

The risks are the same as they are when investing in residential real estate: There is never a guarantee that your commercial properties will increase in value, which is why researching the properties and the communities in which they sit is so important. You might also struggle to find enough tenants to fill that office building or retail center you purchased.

House Flipping

Investors who want to make money quickly often turn to house flipping. This is when you purchase a home for a lower price, renovate it quickly and then sell it for a fast profit. The key, of course, is to buy the right home. You’re not interested in monthly rents when flipping a home. Instead, you need to purchase a home for the lowest possible price if you want to make a good profit when selling.

Again, research is key. You want to find a home in an attractive neighborhood, one that attracts plenty of buyers. And you need to make sure the repairs required for the home aren’t so costly that they’ll swallow any potential profit.

If you’re handy enough to handle renovations on your own, you’ll greatly improve your chances of making solid profits through house flipping.

10 Reasons To Invest In Real Estate

Investing in real estate, like any investment, includes some risk, but it can provide a lot of cash to your bank account. Here are some benefits of investing in real estate.

DISCLAIMER: Nothin is guaranteed in real estate investing. You must do your own research.

1. Cash Flow

Real estate investing is a great way to raise your income. Whether your purchase residential real estate or commercial real estate, you can rent to tenants, producing passive income. You'll receive recurring checks from the renters in the form of checks. Remember to check payment history prior to renting to a tenant, though.

2. Profitable Returns

As real estate appreciates over time, you can sell it for a profit. You can also cash out equity to use in additional home purchases. As a reminder, appreciation is never guaranteed, though.

3. Hedge Against Inflation

Even if inflation is on the rise, and the dollar is losing value, often real estate continues to raise in price, allowing your money to stay safe from depreciation. In high-inflation markets, real estate can be a phenomenal tool. When prices or goods and services are rising, most of the time, real estate prices and rents do too. Therefore, even while you're paying more for normal living, your investments make you more, as well.

4. Tax Advantages

Investing in real estate comes with tax benefits. You can deduct several expenses associated with owning an investment property, including your property taxes, mortgage interest, property management fees, property insurance, the costs of ongoing maintenance, the cost of repairs and the money you pay to market your property to potential renters. If you sell your property for more than you paid for it, the gain you realized won't be taxed as income. Instead, it will be taxed as capital gains, which typically come with lower tax rates than does income. If you invest in opportunity zones – neighborhoods that are in need of investment – you'll pay even less in capital gains.

5. Diversification

During economic turmoil, often, the investors who are diversified are the ones who feel it the least. Real estate investing can offer you protection against other sub-markets, like stocks and bonds, so even if they are going down, your real estate may still be on the rise. This can protect you against losses you take in other investments.

6. Passive Income

Real estate investing can provide passive income alongside additional sources of other income. Your investments can still be making you money without having to work everyday. A lot of people start their investing career while still working full-time. Isn't that amazing?!

7. Leverage Debt and Other Funds

Very few people can afford to buy real estate with cash. Being able to take out a loan to invest in real estate solves this problem. You get to use other people's money to purchase properties and grow your wealth. Banks, mortgage lenders or credit unions can be a source for your loans, and you'll pay them back over time. This allows you to leverage your savings to potentially buy additional properties in a shorter amount of time.

8. Stability

Real estate is often a long-term investment, and you can hold on to it for several years. In the meantime, you can rent it out, making recurring income.

9. Build Your Net-Worth

The obvious goal of investing in real estate is to grow your net worth and own assets that pay you. When you sell a property that has risen in value, you generate revenue and boost your cash assets. This can be a vehicle for you to repeat the process of invest in other things. Over time, you can buy more valuable properties and make bigger profits. The key is to make sure you're making smart decisions and buying the right properties.

10. Fulfill Your Mission

When you own real estate, you control what you do with your money and how it gets to work for you. At the end of the day, it's a vehicle for you to fulfill your dreams, contribute to your family and community and be a positive influence on your country.

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10 Reasons and Benefits to Invest in Real Estate