Whether you have recently graduated from college or are getting close to retirement, it’s likely that you have given some thought as to how you can grow your net worth. The answer is clear – invest in real estate
You might have invested in stocks, picked up a few bonds or have a 401(k) plan set up to help fund your retirement. But have you considered to invest in real estate as part of your portfolio?
In today’s blog post we’ll have a look at three reasons why you should invest in real estate as one of the most effective ways to grow your overall net worth.
by Brent Pope
Reason #1: It Generates Passive Income
One of the best reasons to invest in real estate as part of your investment portfolio is that it can generate passive income in the form of rent. Whether you buy a single-family home or an apartment block, you can almost certainly find interested tenants who will live there.
Part of the rent you receive each month will cover the costs of owning and operating the property. The rest of it is income which will continue to build over time.
Reason #2: It Increases In Value Over Time
Another great reason to invest in real estate is that in most cases, it increases in value over time. As long as you are maintaining the property and investing in its upkeep you have a decent shot at it appreciating in value over time. Even if your rental property experiences little or no appreciation, you will still enjoy increasing equity over time because your tenant is paying down your mortgage.
Keep in mind that real estate is cyclical and that it’s not always going to be the right time to sell and realize your gains.
Reason #3: You Can Leverage Equity To Buy More Properties
Finally, our third reason to invest in real estate is that real estate is the best way to build your worth is your ability to use it as leverage to buy more real estate. For example, say you decide to purchase a house valued at $100,000 as an investment property. You will typically put a down payment and borrow the rest, this is leverage. As you (or more correctly – your tenant) pay down your mortgage you have increasing equity that you can use to borrow against to purchase another rental property. Then repeat with another property. As you can see, this can scale quite nicely over time.
If you are interested in learning more about how to invest in real estate and learn from an experienced investor, give our office a call. We are happy to share our insight and expertise and help reach your financial goals.
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