Real Estates are the assets that generate income. Generally real estate property is held as part of a larger portfolio because it can bring more returns or reduce portfolio risk at the same level of return. Investment is real estates are considered as fairly low-risk investment as these are less volatile than stocks. The following are some of the benefits of investing in Real Estate.
High Leverage: Leverage is the amount of money that is borrowed to get the potential return on investment. Banks give loans by calculating the amount of the loan and dividing it by the value of the property. You can get fifty to hundred percent of the value of the property. This high leverage results in a higher return for the realtor at a lower risk. (as 80% of the purchase price was provided by the bank). Here the investor will probably use relatively a small percentage of his own money to make the property purchase, and the majority of the money is being provided by the lender (banks).
Tax Benefits: A person getting mortgage loan can have a number of deductions as he is entitled to get exempt from taxes, by claiming the interest paid on the loan, repairs and maintenance, depreciation on building and its capital improvements, rates and taxes, travel to and from the property to facilitate repairs etc. Further, tax deductions can also be claimed in case of negative gearing, where the cost of keeping the investment property exceeds the income gained from it.
Earn Income for rest of life: If you rent out the rental properties in real estate, you can earn income without working. Here the rent supplements your earning income. This is the reason for which these property assets are called as income producing assets. Many people like the idea of an investing in an asset that can reap returns even in their retirement. When you have enough of rental income, you can quit your job.