The views expressed by the contributing Entrepreneurs are their own.
Usually, as entrepreneurs, we have our heads down, in the weeds, tearing our businesses apart. Although my first love is business, I have always made real estate investing a priority. I have been a real estate investor for over a decade now, and it has served me very well in addition to the work I have done to grow and scale my businesses. Here are ten reasons why every entrepreneur should also invest in real estate:
Investing in real estate can diversify your portfolio and reduce your overall risk. It can also serve as a great rainy day fund and a place to dip into equity if you need cash and collateral for your businesses. For example, when I first started the business, most of my net worth was tied up in stock ownership of companies. Now, most of my net worth is tied up in the real estate I own, along with company stock. Owning and developing a healthy real estate portfolio helps diversify your business portfolio and income streams and helps hedge your bets against market or business volatility.
Related: 6 Benefits of Investing in Real Estate for Smart Entrepreneurs
2. Huge potential for appreciation
Real estate can appreciate in value over time, providing a potential source of long-term wealth. For example, for the first property I bought in 2011, I paid $310,000. Last year, it was valued at $749,000. This was only on one property. The appreciation you earn on your real estate portfolio provides a large well to dip into if you need emergency funds for your business or if you need to show additional security to get a bank loan for your business.
3. Cash flows
Having extra cash from another income stream never hurts. Rental income from real estate can provide a steady source of cash flow for business owners, in addition to income from your company. You never know when you’ll need extra capital for a business acquisition or some kind of turnaround that might happen to your company. Having an additional stream of income from your rental property can only help you in your business endeavors.
4. Tax benefits
Investing in property can offer various tax benefits, such as deductions for mortgage interest and depreciation. For example, I can deduct interest paid on a rental property mortgage from my taxes, which ends up reducing my overall tax bill. In addition, I also get property depreciation deductions, which helps reduce my taxable income. As your business grows and your income grows, securing useful, powerful tax deductions from your real estate investments is consistently helpful in keeping more of your hard-earned money.
5. Inflation compensation
Real estate investments can act as an inflation hedge, meaning they can protect your wealth from inflation. As the value of money decreases over time due to inflation, the value of real estate tends to increase, helping to preserve the value of the investment. As business owners, we are always looking for ways to maximize our money. Inflation literally evaporates the value of our hard-earned dollars, and having a healthy real estate portfolio just helps you hedge your bets.
Related: 5 Reasons Why Real Estate Is A Great Investment
6. Tangible Asset
Unlike stocks or other types of investments, real estate is a tangible asset. You can physically see and touch the property, and you can even live in it if you choose. This can provide a sense of comfort to many traders, especially those who may have experienced a loss in the stock market.
7. Opportunity for practical participation
Real estate investing provides entrepreneurs with the opportunity for hands-on involvement. You have the option of managing the property yourself, hiring a property manager, or even partnering with other investors to share the responsibilities. This hands-on involvement can also help you understand the real estate market and identify potential investment opportunities.
8. Networking Opportunities
Investing in real estate can also provide entrepreneurs with networking opportunities. For example, you can connect with other real estate investors, real estate agents, contractors and property managers. These relationships can be beneficial to your business in a number of ways, such as identifying potential acquisition targets, finding new customers, or even finding new business partners.
9. Potential to generate passive income
One of the biggest benefits of real estate investing is the ability to generate passive income. This can provide business owners with added financial stability, especially during tough times. This passive income can also be used to grow your business, either by hiring additional employees, investing in new technology, or expanding your product line. I was also able to show this passive income as additional income to qualify for debt opportunities for my businesses.
Related: 5 Tips for New Investors Who Want to Make Money in Real Estate
10. Heritage building
Finally, real estate investments can also serve as a means of building legacy. By investing in real estate, you not only build wealth for yourself, but you also create a legacy that can be passed down to future generations. This inheritance can provide your family with financial stability for years to come and can be a source of pride and success. It also just adds to the legacy you’re already building through your business.
Whether you’re a seasoned entrepreneur or just starting out, real estate investing can give you the stability and added security you need to grow your business and achieve financial success.