9 reasons why 90% of millionaires invest in real estate

The real estate investing business has been gaining popularity in recent years, and this trend is likely to continue in the future. One primary reason for the popularity of real estate investment is that the benefits of investing in real estate are numerous. In the words of Andrew Carnegie, “Ninety per cent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.” In here, I will show you nine reasons why 90% of millionaires invest in real estate.

1. Passive cash flow: Real estate investing allows you to start making money almost immediately. As soon as you have bought a rental property and fixed it up, you are ready to start renting it out. Though, you will most probably need to spend some of your rental income on covering the monthly mortgage payments, the property tax fees, insurance, and others. But after all those expenses, what you have is monthly, recurring passive cash flow. Examples are the rental properties, Airbnb, vacation housing, buying and selling off lands. When you buy a real estate investment that pulls in more money each month than the expenses you carry to own it, your cash flow is guaranteed. Real estate provides a regular and dependable income stream that should produce positive cash flow higher than typical stock dividend yields, which is why many millionaires invest in it.

2. Federal tax benefits: Although many people are not aware, there are many tax benefits to owning a property. In the US and other parts of the world, the government encourages property investment. So many benefits help people substantially lower their taxes including no self-employment tax on rental income, no limit mortgage interest deductions and depreciation accelerations that can shield a portion of the positive cash flow generated and paid out to investors. As a result of the many tax benefits, real estate investors often end up paying fewer taxes overall even as they are bringing in more income. Not only does it make you money, but it allows you to keep a lot more of the money you make. So, it is no surprise why most millionaires venture into the real estate path. The end of the year is a hectic time for real estate because people want to take advantage of the numerous tax benefits before the end of the year.

3. It appreciates: Income producing Real Estate Investments have historically provided excellent appreciation in value that meet and exceed other investment types – the longer you hold onto your real estate, the more money you will make. Real estate investors earn money through rental income, any profits generated by property-dependent business activity, and appreciation. Often, other properties lose value, but for real estate, the cost will nearly always go up as the net operating income of the property improves through rent increases and more effective management of the asset. Although there are also down moments when the industry experiences slow demand, the market always comes back up. Just like old wine, the more extended real estate stays, the more valuable it becomes.

4. It can be leveraged in various ways: One of the most significant benefits of real estate is its ability to leverage. There are four ways to leverage real estate. You can have an investor invest with you and leverage on the person’s money to acquire a property. You can also leverage time by passively investing in projects while active investors and managers do the work. You are further benefiting from leverage when the rental income generated by your investment property is used to pay down your mortgage. And lastly, If you’re new and don’t have the experience, you can leverage the expertise of others. You could do all the leg work because you have the time, you leverage the expertise of another person to evaluate and overwrite the deals.

5. Pride of ownership: The right property in the right location with right tenants and the right ownership mindset can produce a tremendous pride of ownership factor that is highest among all asset classes. The right property in the right location with the right tenants and right ownership mindset can produce a tremendous pride of ownership factor that is highest among all asset classes. Competitive investors invest in real estate and try to acquire as many properties as they can, as a personal challenge. Besides, you can get your properties to be individually titled in your name, giving you complete and total control over your property.

6. Long term income and retirement: Real estate investment will bring you money not only now but also in the future. But pension savings or life insurance or group insurance are reliable investments in the future world, except during a financial crisis. No matter how much you receive in the form of a pension, it will always be great to have some extra cash in your retired years. After all, that’s when you will have all the time needed to try out new hobbies and to travel around the world. Investing in real estate is indeed one of the best ways to achieve your retirement goals, whether as a part-time or a full-time investor. We know that the minimum retirement or even retirement will receive after reaching a certain age, probably will not cover your needs. Anyway, it is best to take care of their old age in a safe manner that gives you the security you deserve – with an additional rental income or selling off your property.

7. It is affordable: Unlike some other investment schemes that require huge capital, investing in real estate is quite cheap. Several affordable investments allow people to invest in real estate, even on a tight budget. One of the simplest ways to get started in real estate investing is Real Estate Investment Trusts (REITs). REITs are good because of accessibility, liquidity, passive returns, and low cost of entry. Investing in public REITs is a simple as buying shares, while some private REITs allow investors to start with as low as $500. Also, if you are beginning to invest in real estate on a budget, you may opt for an investment that gives more diversification than any single REIT. You can do that by investing in multiple REITs through a real estate exchange-traded fund (ETF). ETFs are one of the more straightforward ways to get exposure to real estate without having to make significant upfront investments. Another affordable way is to make your home your first investment through Airbnb. Wholesaling also affords the chance to sell a property without actually owning one. All you do is link buyers and seller and get your gains.

8. Endless opportunities and a diversified portfolio: When you diversify your portfolio, you spread out the risk. Real estate will always serve as a safe concrete asset to alleviate the risk in your wallet and provide a higher return per unit of risk. There are so many strategies and types of properties and rental mechanisms and locations that you will never be bored when investing in real estate, and through which you can diversify. Depending on your situation (budget, location, knowledge, skills) and preferences, you can go for fix-and-flips, Airbnb rental properties, real estate wholesaling, real estate crowdfunding, investing in REITs, and many, many others. The ongoing performance of your real estate investments can also be strengthened by choosing properties in geographic areas with varying economic conditions.

9. Cash-out Refinancing: Refinancing is when you put in a new mortgage on a property that typically extends more favourable terms to the borrower. By refinancing your mortgage, you may be able to decrease your monthly mortgage payments, negotiate a lower interest rate, renegotiate the number of years of the loan, remove other borrowers from the obligation, or access cash through home equity that has built up over time. If your property has equity, you can do a cash-out refinance (pull out some of the capital gained). You can also go-ahead to use the cash-out refinance to buy more properties. Usually, with a refinance loan, the goal is to have a better interest rate and better terms than the current loan. It allows you to convert home equity into cash by creating a new mortgage for a more substantial amount than what is currently owed. The best thing about a cash-out refinance is that it is not a taxable event—little wonder why a whopping 90% of millionaires are into real estate.

An investment in real estate is not only a safe financial investment; it is also an investment that can provide years of peace, happiness and priceless memories that will last a lifetime.