The real estate industry has long been a niche that is continuously growing. However, with the rising mortgage rates and the increasing cost of living, 2023 might seem like a difficult time to acquire income property or discover affordable homes that can be refurbished and sold for a profit.
That said, renters are constantly looking for places to call home, so investing in real estate can be a great way to build wealth this year. Build-to-rent properties made up to 6% of properties as of 2022 but are currently on the rise. Here are the top four reasons to invest in real estate in 2023.
1. Real estate is a tangible asset
If you invest in stocks, all you have to show for your investment is a sheet of paper. You don’t have ownership of anything, and your piece of paper might be worthless if the stock market crashes.
Investing in real estate gives you a tangible asset. While values may increase or reduce throughout the years, tangible assets are worth investment. You are also free to sell the property should you want to get out of the investment.
However, because real estate is a tangible asset, it might take longer to sell as you must work out a deal with the buyer and go through all the legalities. The good news is that experienced realtors can advise you about selling your property fast and for the best price.
2. High demand for rental properties
The demand for rental properties is booming, and the trend is expected to continue. Several factors have led to this increase, such as the flexibility of renting and the high cost of homeownership. Consequently, investors who buy rental properties can expect considerable returns on their real estate investments.
The number of people moving from rural to urban areas is also increasing, which has contributed to a higher demand for rental units in these places. That means you can enjoy a steady income from your rental properties if you have the right real estate investment and tenants.
3. Tax benefits
Real estate offers some of the best tax benefits compared to other investments. Deductions are among the greatest investment tax incentives for real estate owners. These tax write-offs are typically oriented towards rental properties and include costs associated with property tax, mortgage interest, depreciation, and operating expenses. For instance, you can claim depreciation on your investment property, which may give you more cash flow and lower your overall tax bill.
4. Inflation hedges
The main objective of investors is to protect their wealth against the negative impacts of inflation and to maximize their money. Investing in real estate gives a great hedge against inflation, as the values of the assets increase in tandem or higher than the inflation rate, helping to preserve the value of the investment.
When you purchase a property at a higher interest rate, you can always refinance once the rates reduce again. It’s better to pay a higher interest rate for a few months rather than not buying a property.
Despite inflation and increasing interest rates, you can still build wealth through real estate in 2023. If well planned for, investing in single-family homes, multifamily buildings, and commercial properties can bring considerable returns. Take advantage of real estate investment today and enjoy its benefits.