Although investing in real estate might seem like a risky and expensive endeavor, these types of investments are worthwhile, yield better results, and carry a lot less risk than investing in stocks, mutual funds, or certificates of deposit. A recent survey reports that over one-third of Americans favor real estate as their preferred long-term investment, and have since 2016.
Even if you’ve never invested in real estate before, don’t let that deter you from considering real estate as a solid investment venture.
Here are some reasons why real estate is a long-term investment you won’t regret.
[Related: Six Mistakes New Homeowners Make]
You Own It Quickly
Unlike other forms of investment, with real estate you can put down a fraction of the cost and essentially “own” it as your investment. Rather than buying a stock at full value before your investment goes into effect, you can put down 10% of a property’s value and finance the rest through a loan. Over the years you’ll hold more and more of the investment and increase your rate of return as you pay your mortgage.
Appreciation Organically Increases
The current real estate appreciation rate in the United States is an incredible 14.5%, up nearly 11% from 2019. This means your property should increase a significant amount in value without you having to do any additional action — especially in a hot market like Seattle, where demand is outweighing supply.
This is another argument for why real estate is the best investment — you can sit by and watch your investment flourish without doing much of anything.
[Related: How to Buy Off-Market Homes]
You Can Intentionally Increase Appreciation
If you want to speed up that appreciation, however, you can increase the rate through renovations and repairs.
Before you go at your investment with a hammer, you should know that not all renovations will increase your home’s value. Consult with a licensed appraiser to decide which repairs and changes will be the most beneficial, and then work with a professional contractor to make them a reality.
As far as which renovations will increase a home’s value, even smaller kitchen and bathroom repairs can impact a home’s worth, while adding a room or working on the front lawn or patio can also increase its value.
[Related: Fixer-Upper Mortgage Options and What to Know Before You Buy]
Take Advantage of Tax Write-Offs
When you own real estate, you are a landlord and are considered a business owner, so you are able to take advantage of many tax write-offs. Remember to consult a tax advisor before coming to any conclusions, but when compared to investing in stocks and bonds, real estate investment has more of a write-off benefit.
Here are some expenses you may be able to write off as a landlord:
- Depreciation
- Real estate taxes
- Homeowner’s insurance
- HOA dues
- Mortgage interest paid on the loan
- Maintenance expenses
[Related: Five Priceless Reasons to Save Up to Buy a Home vs. Renting]
Earn Passive Income by Renting
One way to earn additional income off of your real estate investment is to rent out your property as a vacation rental or AirBnB.
Just remember to adhere to the Fannie Mae and Freddie Mac requirements if you’re taking out a second home mortgage on the property:
- The property must be occupied by the owner for a portion of the year.
- Secondary mortgages are only good for one-unit homes.
- The property should belong solely to the buyer and not under any timeshare agreements.
- The property cannot be operated by a management company that has control over occupancy.
If your property is clean and organized, and in a desirable location, whether it’s out in nature or close to a bustling city, people will pay to stay there.
[Related: Can I Afford to Buy a Home in Seattle?]
Feel Secure
Real estate is a solid long-term investment, especially in a seller’s market like Seattle. While home values continue to naturally appreciate, the current market is stable and provides pretty good security for those who already own a home. Compared to an unpredictable stock market or other liquid investments, real estate is dependable and will yield the best results.
Contact Seattle Mortgage Planners Today
Are you interested in investing in real estate? Seattle Mortgage Planners is your stop for all of your mortgage and home-buying resources. Contact us today and let’s get started.
