Between retirement accounts, stocks, bonds, and cryptocurrencies, to name a few, there are extensive opportunities for women to invest their funds wisely. While some women also venture into real estate investments, it remains an underutilized investment vehicle. However, it offers numerous benefits that are not available with other investment opportunities. What are some of the reasons why you should think about investing in real estate?
1- Rental Income
Many real estate investments are income-producing. Tenants’ rental payments are often high enough to cover the mortgage payment and other expenses with funds left over for an investor’s profit. Through the net rental income for each property, you can build your income. This income can then be applied to future investment activities. This is one of the ways real estate helps you build wealth.
2- Build Equity
Real estate has a high return on investment. Because your tenants’ rent payments could cover the monthly mortgage payment and expenses, there may be a few out-of-pocket expenses that are not covered by the property’s income. With each mortgage payment made, your equity in the property grows. This is combined with growth in property value as the real estate market changes to further income equity. The result is substantial equity growth over time. Some real estate investors later tap into this equity to invest in other properties.
3- Hedge Against Inflation
Some investment vehicles are poor hedges against inflation, such as stocks and mutual funds. In a high-inflation environment, your wealth from these investments is eroded. Generally, real estate keeps pace with inflation. Real estate values do not dip with immediate responses to market conditions. The values typically follow along with the economy as a whole. Holding it in your portfolio acts as a protective buffer against ever-changing economic conditions and preserves your wealth.
4- Tax Advantages
Few investment vehicles support monthly income generation as well as equity growth, and real estate investments combine these benefits with tax advantages. Specifically, you can write off property-related expenses. This directly lowers your tax liability on the property’s income. Because of this, at least a portion of your income is essentially tax-free. In addition, the monthly rental payments are used to pay down the mortgage. A portion of the mortgage payment is applied to interest charges. Because the mortgage interest is a tax deduction as well, a portion of the property’s equity growth is made with untaxed dollars.
5- Diversification
Even when your investment portfolio is diversified with mutual funds, stocks, and ETFs in your retirement and non-retirement accounts, these are all tied to the stock market. Market fluctuations are frequent and can be significant. Real estate is an independent vehicle. Even when the stock market declines, real estate values are not affected. Real estate values can fluctuate as well, but they do so slowly and often in response to major market indicators rather than fickle investor sentiment.
While real estate is an excellent investment option for women, choosing the right property is important. As you consider diversifying your portfolio, take time to learn about real estate investing and make a smart property selection.
