Everyone needs a financial safety net that supplies a source of income in times of need. While building up a padded savings account is a standard safety net, another option is to invest in real estate. Unlike a savings account, a profitable real estate investment won’t be depleted as funds are used.
7 Reasons Real Estate Investments are the Perfect Safety Net
Whether you buy foreclosed property for less than market value or pay full price, one property investment can become a substantial safety net in an unknown future.
1. Real estate is a lucrative long-term investment strategy
The best financial safety net will provide ongoing, long-term financial support. A savings account can only provide you with whatever you deposit into the account. On the other hand, a real estate investment can become a long-term source of pure profit in the future.
According to Mashvisor, the average rate of return on a real estate investment is 8-12% per year. However, serious investors focus on long-term gains and use their expertise to generate higher returns.
The expertise required to net higher gains is earned through training and direct experience over time so the sooner you start investing, the quicker you’ll get good.
2. One rental property can build your emergency savings account
Plenty of real estate investors use their rental income to build an emergency fund. You can build a significant emergency fund by owning just one piece of property. Experts recommend having three to six months’ worth of expenses in the bank and a rental property can help build and grow that fund.
3. Investing now could save you from unemployment later
Income generated from real estate investments can take the place of a regular salary should you unexpectedly lose your job. Although many US cities are experiencing historically low unemployment rates – like Houston, Texas – you won’t know what the future holds in your area.
Ideally, your property will be paid off when you need the income. However, your mortgage doesn’t need to be paid off for you to benefit. Even a small profit will help you buy food and pay your bills until you land a new job.
4. You’ll always have a place to live
What would you do if your current landlord gave you notice to move out in a month? Where would you go? How much stress would you experience scrambling to find a new place to live? How many days would you need to take off of work to complete your move?
With a rental property, you’ll always have a place to go if your living situation turns sour. You might need to wait for a tenant to move out, but you’ll have somewhere to go in an emergency.
If you don’t have close friends or family nearby, having a rental property will give you peace of mind.
5. You don’t have to be the landlord to generate income
Real estate investing is hard work in the beginning, especially when you’re renting out your property. Many investors cringe at the idea of becoming a landlord, and if you can relate to that feeling, don’t worry. You don’t have to be the landlord.
All you need to do is hire a local, reputable property management company to handle all landlord tasks like screening tenants, processing applications, maintenance, repairs, complaints, and collecting rent.
They’ll even handle awkward conversations, evictions, and inspections. If you want your real estate investment to be a truly passive source of income, hiring a property management company is a necessity.
6. Real estate investments can be passed on to your children
Unlike stocks and bonds, real estate investments will continue to appreciate in value over time. This means your investment properties will provide you with a financial safety net and then you can pass them on to your children or anyone else you wish.
7. Real estate is tax-deductible
Tax write offs are the best reason to use real estate to build your financial safety net. The irony is that while you can deduct the depreciation of your property to reduce your taxes, the value of your property actually appreciates. The money you save on your taxes can be put straight into your savings account.
Plan for an unknown future with real estate
Nobody knows what the future holds, but one thing is for sure – owning at least one piece of rental property can support you financially if you lose your main source of income.