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Usually, as entrepreneurs, we sit with our heads down, in the weeds, grinding our businesses. Although my first love is business, I have always made investing in real estate a priority. I’ve been a real estate investor for over a decade now and it has served me very well alongside the work I’ve been doing growing and scaling my businesses. Here are ten reasons why every businessupdates.org should also invest in real estate:
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1. Diversification
Investing in real estate can diversify your portfolio and reduce overall risk. It can also serve as a great rainy day fund and a place for you to dive into stocks if you need cash and collateral for your business. For example, when I first started business, most of my net worth was tied up in ownership shares of the companies. Now most of my net worth is tied up in the real estate I own along with company stock. Owning and growing a healthy real estate portfolio ensures diversity within your business portfolio and income streams and helps you hedge your bets against market or company volatility.
Related: 6 Benefits of Real Estate Investing for Savvy Entrepreneurs
2. Huge potential for appreciation
Real estate can increase in value over time and be a potential long-term source of wealth. For example, for the first property I bought in 2011, I paid $310,000. Last year it was valued at $749,000. That was only in one area. The valuation you get on your real estate portfolio provides you with a great resource to dive into if you need emergency funds for your business or if you need to show additional collateral to get a bank loan for your business.
3. Cash flow
Getting extra money from another income stream never hurts. Rental income from real estate can be a consistent source of cash flow for business owners, in addition to income from your business. You never know when you’ll need extra cash for a business takeover or some kind of pivot that could happen within your company. Having an additional income stream from your rental property can only help you in your business endeavors.
4. Tax Benefits
Real estate investments can offer several tax benefits, such as mortgage interest deductions and depreciation. For example, I can deduct the interest paid on a mortgage for a rental property from my taxes, ultimately reducing my overall tax bill. In addition, I also take depreciation deductions on real estate, which helps to lower my taxable income. As your business grows and your income grows, having helpful, strong tax deductions on your real estate investments always comes in handy to keep more of your hard-earned money.
5. Inflation Hedging
Real estate investments can act as an inflation hedge, meaning they can protect your assets against inflation. As the value of money decreases over time due to inflation, the value of real estate tends to increase, preserving the value of the investment. As entrepreneurs, we are always looking for ways to maximize our money. Inflation literally evaporates the value of our hard-earned dollars and having a healthy real estate portfolio just helps you hedge your bets.
Related: 5 reasons why real estate is a great investment
6. Tangible fixed assets
Unlike stocks or other types of investments, real estate is a tangible asset. You can physically see and touch the property, and you can even live in it if you wish. This can bring a sense of comfort to many entrepreneurs, especially those who may have suffered losses in the stock market.
7. Opportunity for hands-on involvement
Real estate investments provide entrepreneurs with an opportunity to be involved hands-on. You have the option of managing the property yourself, hiring a property manager, or even partnering with other investors to share responsibilities. This hands-on involvement can also help you understand the real estate market and identify potential investment opportunities.
8. Network Capabilities
Real estate investments can also provide entrepreneurs with networking opportunities. For example, you can get in touch with other real estate investors, brokers, contractors and property managers. These relationships can be beneficial to your business in several ways, such as identifying potential acquisition targets, finding new customers, or even finding new business partners.
9. Potential to generate passive income
One of the biggest benefits of real estate investing is the potential to generate passive income. This can provide entrepreneurs with extra financial stability, especially in difficult times. This passive income can also be used to grow your business, whether it’s hiring additional employees, investing in new technology, or expanding your product line. I have also been able to demonstrate that passive income as additional income to qualify for debt opportunities for my businesses.
Related: 5 Tips for New Investors Looking to Make Money in Real Estate
10. Outdated building
Finally, real estate investment can also serve as a vehicle for legacy building. By investing in real estate, you not only build wealth for yourself, but you also create a legacy that can be passed on to future generations. This legacy can provide your family with financial stability for years to come and can be a source of pride and achievement. It also just adds to the legacy you’re already building through your business.
Whether you’re a seasoned businessupdates.org or just starting out, investing in real estate can provide you with the stability and added security you need to grow your business and achieve financial success.
