- Jace Shepherd
7 Reasons Why You Should Be Buying Real Estate Now
Real estate is an incredibly valuable asset, and right now is a great time to get involved in the market. In spite of the high interest rates and current economic climate, there are several compelling reasons why individuals should consider investing in real estate. From the potential to generate passive income to the long-term appreciation, real estate presents a great opportunity for those looking to increase their wealth. Here, I will outline 7 reasons why you should be buying real estate now.
Investing in Real Estate During an Economic Downturn
Many people are hesitant to invest in real estate during a poor economic environment or recession. It is true that economic conditions do impact the market, but the relationship between real estate and the economy is not a direct one. In fact, there are several reasons why one would want to invest in real estate during a poor economy. First, a poor economy can actually create scarcity in the real estate market. As the economy slows, people are likely to move at a slower rate. We’re already seeing this now with interest rates rising and many buyers are choosing to hold off purchasing property. This causes a shortage of inventory in the real estate market that can drive up prices or at least prevent prices from declining. If you have the capital to invest in real estate, now is actually the perfect time to do so.
Generating passive income
Real estate is an incredible source of passive income. It’s quite common for investors to realize cash flow on their real estate investments in the thousands of dollars each month if they purchase an asset in a good market that continues to grow and hold it for long enough. The amount of rental income you can expect to receive will vary based on the type of property you choose. People who have the financial capacity to purchase real estate should consider doing so in order to generate passive income.
There are several advantages to generating passive income through real estate. First, it can help you achieve financial independence sooner. If you are able to generate enough rental income to cover your monthly expenses, you may be able to quit the 9-5 grind earlier than you would have otherwise.
Long-term appreciation of property value
Another great reason to invest in real estate is the long-term appreciation of your property value. While it’s difficult to predict the future, it is reasonable to assume that real estate will continue to appreciate over the long haul. Real estate is a tangible asset that will outlast almost anything. It holds its value extremely well over time — as long as it is properly maintained. Even in periods of economic turmoil, real estate has a way of holding its value and is considered a safe long-term investment. This is an excellent reason to purchase real estate if you are looking to build long-term wealth.
One of the lesser known reasons for buying real estate investments is the tax benefits you receive. State and federal income tax deductions for your mortgage interest and property taxes, as well as depreciation are among the many ways that real estate can benefit you tax-wise. The government realizes that real estate properties wear down over time and therefore offer you some tax benefits to help offset that loss in value in the form of depreciation. Even better is that most lenders can add depreciation back as income when you’re trying to qualify for mortgage loans, giving you the ability to purchase even more real estate over time.
Leverage of other people’s money
Another reason why you should be buying real estate now is that you can take advantage of the leverage of other people’s money. You get the tax advantages and appreciation on the full value of the asset, but only need a small percentage of that of your own capital (25% or even less depending on the situation). Using other people’s money to fund your real estate investments is a great way to build wealth.
Investing in real estate is a great way to hedge against inflation. Inflation refers to the rising cost of goods and services, which causes your dollar to lose value. This is what we’re experiencing right now in our country, and is the the reason the Fed has raised their target rates to try and slow the economy and bring inflation back down to around their 2% goal. Real estate tends to rise in value when the economy experiences inflation. This is because demand for real estate is high when people have a higher income. As inflation causes incomes to rise, people will gravitate towards purchasing more expensive homes. This will drive up property values and make real estate a great hedge against inflation.
Access to exclusive deals
One more reason why you should be buying real estate now is that you will have access to better deals than we’ve seen in years. These deals may include foreclosures, short sales, or other just sellers finally being willing to negotiate terms that are more favorable to buyers. Purchasing real estate now will give you greater access to these deals, allowing you to purchase at a discounted rate that may never be available again. If rates start to come down next year, all that demand that moved to the sidelines will start to flood back into the market and it will again be more difficult as a buyer to find the right investment and competition will be much higher than it is right now. Now is a great time to get involved in the market and take advantage of these exclusive deals.
With interest rates between 6.5% and 7% currently, it’s created a very unique opportunity and what I believe is a great time to purchase real estate. Interest rates don't last forever and if rates drop in the next few years the option to refinance will always be there. There is so much fear right now, but for those that are buying smart and holding for the long-term I believe we will look back at this time as an amazing opportunity.