As home prices appreciate due to inflationary pressure, homeowner equity continues growing while the mortgage balance shrinks. Further, as inflation pushes rents upward, the spread widens between the rental income and fixed mortgage, generating more cash flow.
InflationHedge
With quality tenants in place, a good property manager can handle all the day-to-day responsibilities, allowing you to sit back and collect passive cash flow without worrying about repairs, maintenance, or tenant phone calls.
PassiveIncome
Compared to equities, real estate can offer more predictable, frequent, and more stable cash flow. Additionally, rental income can increase faster than dividends, further magnifying your return on investment.
PredictableCash Flow
The ability to take depreciation, a non-cash expense, off your rental income lowers your total taxable income without impacting cash flow. Additionally, rental real estate affords numerous tax deductions and the ability to defer capital gains indefinitely.
Tax advantaged investment
Real estate owners are prime estate planning candidates, given the valuable estate planning strategies available, including vehicles like Qualified Personal Residence Trusts (QPRTs), grantor trusts, and 1031 exchanges.
Estate
planning
planning
Stocks can be more volatile than the housing market, with prices fluctuating more frequently and more rapidly. A more volatile asset adds more risk, so real estate can be seen as a safer relative investment.
Lessvolatility
Diversifying your investments outside of traditional asset classes allows you to reduce your risk and minimize losses. Diversification within your portfolio spreads risk across different assets that in theory will react differently to the same market event.
Diversification
Investors can use leverage with their investment, minimizing the amount of capital required upfront. This allows you to own property worth significantly more than your investment, while fully participating in price appreciation and receiving cash flow.
Leverage
Real estate is a tangible asset with intrinsic value, helping it retain its value over the long-term. Further, land is a finite commodity and people will always need a place to live.
Practicality