William Huston, AIF®, AIFA®

10 Key Reasons Why You Should Invest in Real Estate

William Huston, AIF®, AIFA®

William Huston, AIF®, AIFA®

10 Key Reasons Why You Should Invest in Real Estate

Investing in real estate has long been a proven strategy for wealth creation and financial stability. From commercial to residential real estate and rental properties, the real estate market offers a range of opportunities for investors.

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Whether you're a seasoned real estate investor looking to diversify your portfolio or a beginner taking your first steps into the world of investments, understanding the benefits of acquiring real estate investment properties can help you make informed decisions and reap the rewards of this lucrative asset class.

If you want to understand more on why it is beneficial for you to invest in real estate, then keep reading.

Key Takeaways
  • Real estate investing can be a means through which investors create wealth and financial stability. Investors can generate income from monthly rental payments and appreciation of real estate assets
  • Some of the benefits of investing in real estate include potential for long term appreciation, predictable cash flow and portfolio diversification
  • To invest in real estate, investors can choose to take a direct or indirect approach. Direct investment is where one purchases and owns the property while indirect investment includes buying shares in a REIT or investing through a crowdfunding platform
  • It is advisable that beginner and seasoned real estate investors work with qualified financial advisors and real estate agents in their investment journey

The contents of this article are for educational purposes only. They are not intended to be a source of professional financial advice. You will find experts on financial planning and financial management here. More on disclaimers here.

Why You Should Invest in Real Estate

real estate property

Real estate investing can offer a range of benefits and opportunities for individuals looking to grow their wealth and secure their financial future. Here are 10 key reasons why you should consider investing in real estate.

1. Potential for Long-Term Appreciation

Real estate has historically appreciated in value over time. While there can be short-term fluctuations, long-term real estate investments tend to appreciate, allowing you to build equity and potentially generate significant returns.

If you own rentals, the price of rent also tends to increase over time. That means that as a real estate owner, you can generate stable cash flow from the rental property.

2. Cash Flow and Passive Income

cash earning from real estate investments

Rental properties can provide a consistent cash flow and passive income stream. By renting out your property, you can generate monthly rental income that can cover your mortgage payments, property expenses and even generate profit.

3. Portfolio Diversification

f you're looking to diversify your investment portfolio, real estate assets are great to include in your portfolio. It has a low correlation to the stock market and bonds, which means it can help protect your portfolio from market volatility and provide stability during economic downturns.

4. Tax Advantages

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Real estate investors can benefit from various tax advantages, including deductions for mortgage interest, property taxes, depreciation and expenses related to property management. These tax benefits can help reduce your overall tax liability and increase your cash flow.

5. Real Estate Leverage

If you own a real estate asset, you can use it as leverage to borrow money as it can serve as collateral. This means you can control a larger asset with a smaller upfront investment, potentially magnifying your returns when property values appreciate.

For example, if you own a house and you want to buy another one, you can use the house that you already own as collateral when obtaining a mortgage from a financial institution.

6. Real Estate Investment Vehicles

As an investor, you can directly or indirectly invest in real estate. Direct ownership involves purchasing and owning a property. On the other hand, indirect investment can include buying REIT (real estate investment trusts) shares, investing through real estate crowdfunding platforms and real estate mutual funds. These investment vehicles offer different levels of risk, capital requirements and diversification options, allowing you to choose the approach that aligns with your investment goals and risk tolerance.

7. Hedge Against Inflation

Real estate investments can act as a hedge against inflation. As the cost of living increases, rental income and property values tend to rise, allowing you to maintain your purchasing power and potentially increase your income.

8. Tangible and Enjoyable Investment

Owning real estate provides a tangible and enjoyable investment experience. You can physically see and visit your properties, make improvements and create spaces that provide value to tenants or potential buyers. It can be a rewarding and fulfilling investment journey.

9. Control and Flexibility

Unlike other investments, real estate provides you with a physical asset that you have control over. You can make strategic decisions to improve the property, increase rental income and enhance its value, giving you a level of control and flexibility in your investment.

10. Retirement Planning

retirement planning advisor

Real estate investments can play a crucial role in retirement planning. By acquiring income-producing properties, you can build a reliable income stream that can support you during retirement or serve as a valuable asset to sell or pass on to future generations.

Investing in real estate can be a profitable venture that can help you diversify your investment portfolio. However, it's important to conduct thorough research, understand the local market dynamics and consider your own financial goals and risk tolerance before making any investment decisions. Consider speaking to a financial advisor and real estate professional before you acquire any investment property.

The Bottom Line

Despite all the benefits of investing in real estate, there are some drawbacks, a major one being the lack of liquidity. Unlike stocks and bond transactions, real estate transactions can take months to close. Even with the help of a qualified real estate agent, it can take a few weeks of work just to find the right counterparty.

Still, real estate is a distinct asset class that's simple to understand and can help investors diversify their investment portfolio as you have the option to invest in commercial real estate, residential properties or REITs.

If you're looking to get started in real estate investing and would like to work with a real estate professional to guide you through the journey, then get in touch with Ila here.

Bay Street Capital Holdings

Bay Street Capital Holdings

Based in Palo Alto, Bay Street Capital Holdings is a reputable financial planning, wealth management and investment advisory firm that places a strong emphasis on effectively managing overall risk and volatility rather than solely focusing on maximizing returns.

The firm was founded by William Huston, who was recognized as one of Investopedia's Top 100 Financial Advisors in 2021. Bay Street stands out as one of the only two Black-owned firms among the nineteen acknowledged in California. The company's commitment to fostering diversity and supporting emerging fund managers and entrepreneurs is evident, as reflected in its recognition as a finalist in the Corporate Social Responsibility (CSR) category for the Asset Manager in 2021, competing against over 900 firms nationwide.

In 2023, Bay Street has been named a Finalist in the wealthmanagement.com 2023 Industry Awards under the category of Asset Managers: Diversity, Equity and Inclusions for its work with Resthaven Properties.







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