Building a strong real estate portfolio is a great way to create passive income now and a strong investment portfolio for later.
If you are looking at building your investment portfolio, real estate can be a powerful tool that brings passive income and tax breaks to the table. However, like most investment opportunities there are risks associated with real estate investment as well. For instance, property devolution and vacancies are two common risks that you need to cleverly mitigate if you want to achieve maximum investment results.
However, if you are willing to take on a reasonable amount of risk, you can create a solid passive income for your family for decades to come. The only thing you have to decide is if you prefer residential property investment or commercial property investment. Here are just a few of the many benefits associated with investment property.
You Manage Your Level of Investment
Investment property is appealing to those who prefer to take a hands-on approach to money management. If you wish, you can find and buy your own property, rent to the tenant you wish, and then determine how much to charge in rent. You also have the option to manage the property on your own and take care of its maintenance if you wish. However, this can be a lot of work, which is why many people also choose to use a property management service to take care of all of these tasks after property purchase. This allows you to be as involved as you want after the initial real estate investment purchase.
Consistent Cash Flow
Another benefit of investment property is that once you have a tenant it puts immediate cash in your pocket. A lot of investment opportunities take time to mature and don’t offer immediate cash returns. However, property investment is not one of them. As soon as you start renting a property you will have access to a monthly passive income. From time to time, you will need to put money into maintenance, but if you manage your property properly those can be kept at a minimum.
The goal of most investment strategies is to avoid taxes whenever possible. Real estate investment offers a wide range of tax benefits and breaks. While they vary based on where you live, in most cases you can deduct a lot of the costs associated with rental properties allowing you to save a bit come tax time.
Long-Term and Short-Term Security
As previously mentioned, real estate investment is one of the quickest ways to build a passive income stream, but it also offers long-term security as well. If you choose investment property wisely its value will grow over the next decade or two which means that eventually when you are ready to cash out your investment you will earn a profit compared to your initial investment.
Inflation is an unavoidable part of life, but real estate is one of the few investments that can be shielded from its effects. Home values and rents typically rise alongside the price of other things which means if you wisely keep your rental income paced to current demand you will be financially protected against the impact of inflation.