You can invest your surplus cash in various places as well as there are many options to increase your wealth. Real estate investments or investing in property has created much more millionaires rapidly than any other type of investment. However, Investing in residential property is the current trend of the financial market. Residential properties are more profitable than the commercial properties. Due to the rapid growth of population around the globe, there has been a rise in the business of residential properties. Residential investment in property is an investment in property that an investor buys in order to gain profit either by renting or reselling. Generally, there are three types of this kind of property, each with their own investment benefits and risks:
Condominiums
The residents share a type of housing in which owners live in one part and the remaining part is shared commonly. The value of this type of housing is generally lower than a private house governed by the series of bylaws and agreements that each of the residents has signed. Appropriate governance raises the value of condominium and inappropriate governance lowers it value. Overall, the value of this type of housing fluctuates but as a lot of people together owns the property; there is no problem in the annual maintenance and other external repairs.
Private Houses
The value of a private house is much higher due to privacy and space; however, because of its high price it remains unoccupied for a longer period of time. There is no mechanism to ensure that its value will not depreciate due to the negligence of its occupant. However, property owners can always pay more attention and care to the house than the tenants can.
Multifamily Housing
It is a type of housing where many individual housing units live inside one building. The main advantages of investing in multifamily housing, as residential investment in property is that for most of the time residents occupy it, which is not true in the case of private, or condominium property. As there are, several housing units in one building or apartment it makes for an ideal income source that solves the problem of depending on one specific source of income.
Following are few reasons for investing in Residential Property:
- It is necessary to invest 100 per cent in most of the investment plans but you can purchase a home with small amount of payments.
- Tax Benefit
- You can deduct local property taxes and interest on mortgage from your tax returns. Your property taxes are completely deductible from your tax return.
- You can borrow the loan against your equity and thus, deduct the payment of interest on loan. It is a sort of double dipping on your debt.
- There are various incentives for first time homeowners and those who qualify for VA loans. However, these incentives have become extinct and politically unpopular.
- If the value of your property increases, you can make a profit by selling it. All or some part of your profit is exempt from the federal taxes.
