6 Benefits to Real Estate Investing
Whether you’re young like me, new to the market, a seasoned pro or planning for retirement, it never hurts to get the straight facts on how your investments can impact you. Investing in real estate doesn’t have to be a tricky operation. Below, Vision has listed what we consider to be the top 6 benefits to real estate investments, particularly investing in properties in Alberta.
As the cornerstone of a well-balanced investment portfolio, diversification helps to offset volatility in any one particular asset class and ultimately reduces overall portfolio risk. Investing in real estate is a powerful way to add a valuable layer of diversification to your investment portfolio.
Leverage simply means using borrowed capital to enhance the earning potential of an investment and when compared to other investment classes, real estate delivers the greatest opportunity to use the power of leverage. Since real estate is a tangible asset, financing is generally more easily attained and your potential returns are heightened considerably compared to a non-leveraged investment.
3) Other People’s Money
One of the hallmarks of real estate investing is the ability to use the rental income you earn each month to pay down your mortgage financing. This benefit is unique to real estate investment. In fact, when you invest with Vision, the rental income you earn will be sufficient to cover your mortgage payments and the other expenses associated with your investment unit while also providing monthly cash flow.
Investing in carefully selected residential real estate lets you combine the benefits of leverage with property value appreciation over time – and what a powerful combination this is. Mortgage financing is reduced nominally each month while your property value increases over the long term, resulting in increased equity and, ultimately, the creation of wealth.
5) Preferred Tax Treatment
Whether you invest in our real estate investment opportunities inside or outside your RRSP, the growth in value your property experiences is sheltered from tax until you sell the property. There is no limit to the amount of value growth you can shelter when you invest in real estate. As well, when a capital gain is triggered by the sale of a property, you benefit from the capital gains status of this profit – 50 percent of the gain is taxed at your marginal tax rate while the other 50 percent is tax free. Value-added tax deductions such as the ability to deduct the cost of financing and operating your property also minimize the amount of tax you will pay.*
* Your specific tax advantages may differ from other investors. We recommend that you consult an accountant or lawyer for more detailed information.
6) Long Term Cash Flow
Many real estate investments offer positive monthly cash flow after your mortgage and related expenses are paid. This cash flow strengthens as your mortgage financing decreases incrementally and rental rates increase over time, thereby creating a growing source of secure retirement income. As property values increase and mortgage financing decreases, real estate investments also offer you a renewable source of capital through re-financing options. This can be a very effective way of supplementing your retirement income or creating a legacy for future generations.