Why putting your money into real estate will diversify your portfolio, provide predictable cash flow, and improve your financial situation.
Are you looking at homes for sale in Los Altos to invest in this year? As any experienced Los Altos realtor will tell you, real estate is an excellent investment in almost any type of economy, but it’s an especially good bet right now. With mortgage interest rates at record lows, investors can save hundreds of dollars on monthly payments and improve their financial situation.
Ready to take the next step and invest in real estate in 2021? Here are eight reasons why it’s an excellent idea.
1. Real Estate Appreciates in Value
Knowing which types of investments appreciate and in what types of economies they appreciate is an important piece of knowledge for any investor. In general, types of investments that tend to appreciate
are stock market index funds, cryptocurrencies, gold, government bonds, and, of course, real estate. While some of these options may only appreciate when the economy is favorable, real estate increases in value in almost any type of economy. In the past 50 years, real estate in the United States has appreciated by six percent per year. And that includes the economic downtown that started in 2007. When you purchase one of the homes for sale in Los Altos, you’ll be making a solid investment that will increase in value the longer you own it.
2. You Can Leverage Real Estate
Every investor is familiar with the word leverage, or the use of borrowed money to increase the potential returns on investment. Leverage in real estate occurs when a mortgage is used to reduce the amount an investor has to come up with to purchase a property. After you have built up equity in your property by paying down the mortgage, you can then leverage that for cash by securing a second mortgage or refinancing the original loan plus the increased equity. When you free up cash, you can then work with a Los Altos realtor to buy another piece of property and build even more equity that you can leverage for cash.
3. You Can Deduct Real Estate on Your Taxes
Smart investors always keep taxes in mind when they make investment decisions. There are a number of smart investments you can make that allow you to postpone taxes or reduce the amount you will owe on the investment. Options include
Roth IRAs, 529 college savings plans, and traditional IRAs. When you invest in real estate, you not only won’t owe more in taxes for your investment, but you’ll actually get to make extra deductions. The tax code lets you make various deductions when you buy homes for sale in Los Altos. You can deduct property upkeep, improvement, maintenance, and the interest you pay on your mortgage. These deductions help you offset what you pay in taxes each year and increases the value of your investment.