Real Estate Investment: Road To Early Economic Freedom

 The Covid-19 pandemic has changed the lives of billions of people across the world within a few months. For- those in property management and the real estate industry, this entire year has been analogous to walking on eggshells. However, over the past few months, economic growth and consumer investment have made a resilient recovery. 

Accordingly, investment in real estate has escalated swiftly, with relatively low mortgage rates, following a positive trajectory. Real estate investing, if done right, is the highest-earning asset class a portfolio can have. 

Real estate investment is the best way of achieving early financial freedom. 

Here is why you should invest in the real estate market:

It Is One Of The Safest Investments 

Unlike fiat currencies like the dollar, Euro, or Pound, the US real estate market does not lose value to inflation; within a year, it performs better. Your investment rarely loses value, and if so, it bounces back after a short period. Proactive investors can even set themselves up in down markets by buying value-added assets, as was witnessed in the economic crisis of 2008. 

Appreciation In The Estate Values

Appreciation or the rising prices of the estate over time is how most capital gain is built in real estate. While prices alternate, over the long run, the values have always increased. The hidden brownie point in real estate investment is that appreciation combined with leverage offers huge returns. 

Let's further understand by example. Suppose you buy a property for $400,000, and the value appreciates to $440,000, making you a 10% return on investment. However, you likely did not carry out the property purchasing transaction in cash and instead used the bank's money. So, now, if you consider that you have put $40,000 down, you might have doubled the investment, a 100% return.

Forced Equity

Forced equity is the capital gain created when an investor works on a property to make it worth more. Unlike appreciation, where you are subject to the whims and fancies of the market fluctuations that are beyond your control, forced equity allows investors an option where they can increase the respective estate value. Adding a third or fourth bedroom or adding square footage to a property is an example of forced equity. This is the "home run" that can make a large windfall of money.

Taxes 

Real estate investors generally pay fewer taxes. Real estate investors develop society by developing properties for the public. Well, this tends to look favorably towards real estate investor's tax liabilities. 

So if you're planning to invest in real estate, you can be exempted from paying:

• Property tax deductions
• Travel expenses associated with the investment
• Legal management services deductions 
• Depreciation deductions

Leverage 

Real estate is one of the easiest assets that can be leveraged. Not only is it easy to leverage its financing, but the terms are incredible too. Not only are the Interest rates below 5%, but the down payments can be 20% or less, and loans can be routinely decreased over 30 years. The best part of investing in real estate is that not only are you paying down your debt, but you are also creating cash flow. 

"Should I invest in real estate in real estate?" will become a rhetorical question when the investment is undertaken, keeping in view the US real estate market fluctuations. With diligence and proactive planning, real estate investments can generate sufficient income to compensate for a financial loss or an early retirement. On top of generating capital gain, additional benefits like depreciation, mortgage paydown, etc. are associated with real estate investment.