Paying Closer Attention To My Financial Statements

Why You May Want To Invest Your Wealth In Real Estate

3 December 2015

Barb Morgan

If you have a great deal of wealth and are unsure of how to manage your money the best way, you may want to hire a private wealth management firm for help. This type of firm will be able to help you minimize your taxes and risks and generate more money with the money you already have. One suggestion they may have is to invest in real estate. Investing in real estate is a great way to make money and control your tax liability, and here are several things to know about this.

You Do Not Have To Be Involved

The first thing to realize is that if you decide to invest your money in real estate, you do not have to be involved in managing the property. You could simply loan your money to people that want to buy real estate, and this would make you a real estate investor. You will provide the funds to purchase real estate properties, such as apartment buildings or commercial space, and someone else will manage it.

This is a huge benefit if you want to reap the rewards offered through real estate without having to do the work; however, if you want to manage the properties yourself, you may be able to make even more money with the properties you own.

You Get To Write Off Expenses

One of the main reasons financial advisors recommend diversifying a portfolio by adding real estate to it is to reap the benefits of the write offs. When you purchase properties, you will get one main deduction that will help lower your tax liability, and this is called depreciation.

Depreciation is not an expense that you actually have. In other words, you do not have to pay for depreciation like you do with other expenses. Depreciation is an allowable expense you can write off on your taxes, and it is designed to accommodate for the loss in value of a property. While properties may not actually lose value, you can still write off depreciation as an expense.

The benefit of this is that it decreases your net income on the investment, which in turn causes your taxes to be lower. In addition, if you finance at least part of the purchase, you will also get to write off the mortgage interest you pay for the property. This too can be a large amount to write off; however, you will not get to write off this expense if you pay cash for the entire purchase.

Your Investment Will Continue To Increase In Value

Finally, when you invest in real estate, you can almost be certain the investment will continue to increase in value for as long as you own it. You can assume this simply because of the way prices of homes have steadily increased over the last few decades. While property values can fluctuate, they tend to consistently increase over time.

This means that you will be placing your money in an investment that should not lose value, and this is an important part of choosing the right investments. In addition, owning rental properties offers a good source of steady income. If the property is managed properly, you will most likely make a good return on your investment during the time you own it.

A private wealth management firm will not recommend placing all your money in rental property investments, because diversification is always vital when investing money. If you are interested in learning more about how to manage the wealth you have, you may want to make an appointment with a private wealth management firm today.

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