Why should you invest in real estate in multiple cities across, America? This is the question that I want to answer for you today.
I’m sure you have heard about all the great reasons why you should invest in property, so my intent isn’t to regurgitate what you already know.
There are several reasons why you should invest in real estate in multiple cities. Here are six reasons why you should invest.
- Spreads Risk
Think of investing in real estate as you would investing in the stock market. In the stock market, most of the “smart” money tells you to diversify you stock portfolio to mitigate the risk of losing all of your money.
You can even find this theory in practice with mutual funds and ETF’s. These funds buy shares of different companies, weighted by risk and other factors. Investors can buy these investment funds depending on their risk appetite. You can apply this theory to investing in real estate in multiple cities.
By investing in multiple properties, you spread the risk of losing money due to regional factors in a particular market. Factors influencing housing prices in Cleveland will not be the same in say Cincinnati or Columbus.
2. Gain Holistic View Of Housing Market
The benefit of owning investment properties in multiple cities is you gain a holistic view of the housing market. You can see emerging trends before many of the “home flippers” or other competitors rush into the market. By studying patterns in multiple markets, you can make strategic decisions about what properties you should buy and which ones you can let go of.
In contrast focusing on just one market, you don’t really get a sense of what is going on outside a particular city or neighborhood for that matter. With a one market strategy, you don’t see the forest through the trees.
3. You Get To Keep More Of Your Money
Paying taxes isn’t anyone’s idea of fun. Am I right? We all worked hard to keep our money and would like uncle sam to take as little as possible. Investing in real estate across multiple cities allows you to keep more of your money. This is especially true for small business owners who have to pay the self-employment tax.
Profits from investment properties are not subject to the self-employment tax and are taxed at much lower rates than personal or corporate income. The capital gains tax goes from 0%-20%, whereas the personal income tax ranges from 0%-39.6% plus an additional 3.8% taxes on net investment income for higher wage earners.
4. Tax Deduction Strategy
By investing in real estate in multiple cities, you are basically a business, which means you can deduct certain expenses from your tax bill. A big one would be your travel expenses. The associated cost of traveling to your investment property to check on it, room and board, car rentals and other expenses can be written off on your taxes.
5. Leverage Economic and Technological Innovation To Your Benefit
This is probably one of the most overlooked benefits of investing in multiple real estate properties. Simply the more property you own, the more you can leverage technology to lower your cost of ownership.
Companies such as Airbnb, Tripping.com and VRBO make it possible for property owners to rent out their homes or individual rooms for a fee. This new “sharing” economy is perfect for real estate investors. You could run a mini-hotel service and not have to worry about long-term tenants if you wanted to go that route and make a healthy profit.
Buying properties in Miami and San Diego and renting out homes through Airbnb would provide you with a profit between $28-$31K annually.
6. Take Advantage Of State Solar Policies
What does solar energy have to do with real estate investment? Solar and other forms of “green” energy are increasingly in demand from consumers who want to protect the environment and lower their electricity bill.
Residential solar systems should be part of your investment equation because adding solar can add to your property value. Studies have shown that for an average 3.6kW solar system house, buyers were willing to pay $15,000 more for the home vs. a home without solar.
With healthy tax incentives to reduce the cost of going solar plus zero down financing, you can leverage solar incentives in each state to increase your profits. Here are the states with the best solar incentives. Use these solar incentives to buy property strategically.
Overall investing in real estate is a great way to make money now and in the future.
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