Top 5 Reasons for Rental Real Estate Investing

We all know that we should be diversifying our investment portfolios. Stocks, bonds, 401(k)s, and IRAs are all the typical avenues, but there are a lot of other ways to turn money into more money. One of the most promising investment options utilized today is rental real estate investing.

Also known as buy and hold investing, this strategy involves buying a commercial building, apartment building, or single-family home and renting it out for number of years. When the market seems primed, rental properties can be sold for a significant profit in addition to the monthly income taken in through rent. Such investments can be made even more lucrative by using buy and hold loans to better leverage your existing wealth and/or to invest in multiple properties at once.

If you haven’t considered rental real estate investing, here are the five top reasons why you should:

• 1.More predictable returns than stocks and bonds.

Real estate is one of the soundest investments that you can make. Home prices are cyclical, but they also usually follow an upward trend. Depending upon the neighborhood, home prices can be expected to increase on average anywhere from 3% to 15% every year. Of course, in bad years home prices can drop significantly, but the dips that home prices take don’t even come close to comparing to the potential losses on stocks or bonds. Plus, by investing in homes or commercial buildings in a variety of areas, rental real estate investors can hedge their bets and almost guarantee solid overall returns.

• 2.Real estate offers an inflation hedge.

Home prices have a tendency to rise at least as much as the inflation rate, making rental real estate a more lucrative option than other types of investments which tend to ebb and flow with little regard for inflation. When inflation goes up, rent prices inevitably follow suit.

• 3.Regular monthly income.

One of the biggest advantages of rental real estate investing over more traditional forms of investment is the fact that rental properties provide regular cash flow in addition to the large payout when the property is sold. Whereas investing in stock only allows you to watch your wealth grow on paper, the rent collected from buy-and-hold properties can be immediately reinvested or put to use in any way you choose.

• 4.Investing in real estate creates equity.

For those investors who are comfortable taking on additional financial risks, buy-and-hold properties can be used as equity to finance other types of investments. By borrowing against a real estate investment, an investor can save themselves money due to the deductibility of the mortgage interest and the relative savings of borrowing against other types of capital.

• 5.Being a landlord comes with a number of tax benefits.

Renting out a buy and hold property makes investors subject to a number of tax benefits. Any repairs or renovations done on a rental property are tax-deductible, as are the costs of traveling to and from the property. Tax benefits are available for meeting certain environmental standards, and landlords can deduct mortgage interest and real estate taxes on rental properties, among numerous other benefits.