5 reasons to own an investment property

A passive income is a great way to build wealth for the future. You can put money into an investment property by combining real estate with strategically chosen assets. This way, you'll guarantee predictable cash flow, tax advantages, and numerous benefits.

In this article, I'll display the top reasons to jump on the bandwagon with investment properties. For example: 

1. What is an investment property? 
2. How they work 
3. Reasons to own an investment property  
4. Wrapping up

1. What’s an investment property?

First, before elaborating on the benefits of an investment property it is necessary to understand its long-term significance. Likewise, how you can acquire one and do well out of it. 

Investment properties in the real estate market are properties bought with the sole purpose of getting a return on investment. This could be through rental income, future resales, or both. They can be long-term or short-term investments. 

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On the other hand, these assets tend to be held by an individual investor, a corporation, or an investment group. Most of the time, investors use investment properties in flipping transactions or rental uses. 

2. How they work 

Now, understanding investment properties is easier than you may think. Firstly, they provide some form of income (interest, rents, royalties, or dividends) outside of the property’s owner's usual line of business.

At this point, it's important to clarify that investment properties are not primary residences. They are not second homes. On the contrary, they are a new form of passive income. Like adding an Airbnb to your portfolio. 

An investment property is held within the entrepreneur's portfolio until they find the proper use for it. This is called the best and highest's use. For instance, if the entrepreneur wants to use the property for commercial and residential uses, it's key he considers the pros and cons before launching the asset in the market

3. Reasons to own an investment property

So, let's get down to business. In my opinion, owning an investment property is one of the safest and fastest options to generate income in the real estate market, grow your net worth, and increase your capital.  

If you've been thinking about purchasing an investment property, here are my top picks. 

Reason 1: Capital Growth 

It means how the value of an asset can be appreciated over time. When looking for an investment property, it's important to evaluate the different attributes that could enhance the value. 

My recommendation is to look for suburbs with big development plans. This way, and with the proper research, you could find a property below market value that could be worth double your initial investment in the future.

Reason 2: Tax Deduction 

In this case, real estate investors take advantage of several tax breaks or deductions at tax time. Subsequently, allowing the investor to save money by deducting reasonable costs such as owning, managing, and operating. 

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Another recommendation I give you is to speak with a tax consultant to know if your property could produce an investment loss. To clarify, if you decide to rent out the property and the income is less than the expenses, then is negatively geared. 

In this case, the consultant can guide you through reducing your overall taxable income, reducing the tax you must pay as a result. 

Reason 3: Portfolio diversification 

Another benefit of investment properties is the possibility of expanding your portfolio. To thrive in the real estate market, you will need a high-level portfolio. However, this doesn’t mean you have to go only for big properties. 

Owning different types of assets (high and low level) guarantee a higher return and a lower risk per unit. Giving your portfolio an enhanced, more profitable view. 

Reason 4: Building Equity

Investment properties can be the key to increasing your capital. When you pay down the mortgage for the property, you'll be building equity on the side. Then, that same equity will open the door for leverage.

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In the end, you will enjoy both equity and leverage to buy new properties and increase cash flow, ensuring your future wealth. 

Reason: 5 There's no better time than now 

Success is not only a matter of luck. In my opinion, you must go out there and find it. Real estate is one of the safest ways of building wealth nowadays. Therefore, if you keep on waiting for the "right time", stop making that mistake. 

Owning an investment property is a top choice to generate income. Waiting will make you lose money instead of earning it. 

4. Wrapping up

To discover more content like this, make sure you subscribe to my YouTube channel. I post very interesting content about how to thrive as a real estate investor every Friday.  Also, you'll access The Real Estate Entrepreneurs Podcast where I talk with different entrepreneurs about their wealth-building journey.