Five Reasons to Start Investing in Real Estate
Doctors work long hours and undertake risky medical procedures to earn high incomes. The Bureau of Labor Statistics states that the average annual income of doctors is $210,960. As a doctor, that puts you in a higher income bracket than most people, but since you also have to pay higher taxes, it will not put you in the comfortably rich ever after section. That is why you might want to consider making investments in different areas, out of which real estate investing for doctors is one of the safest ways to build your wealth.
Five Reasons to Start Investing in Real Estate
Here are five reasons why you might want to start investing in real estate:
1. Appreciation
The main benefit of real estate investing for doctors is that many properties tend to increase significantly in value or appreciate over time. If you have a rental property, you can raise its rent periodically by a small amount in a way that does not inconvenience the renters and can boost your annual rental income. Since the property value gets assessed by the rental income, its value will increase too. However, it can help to keep in mind that appreciation rates can differ for different markets.
2. Earn Passive Income
Earning a passive income is another important benefit of real estate investing for doctors. You can research the property market and get a fairly accurate idea of the rental rates you can charge every month and the outgoing expenses you are likely to incur. You can receive regular rental income from your real estate investments without any active involvement on your part. If necessary, you can even hire a property manager to handle your property or properties on your behalf.
The real estate rental income will be taxable, but the tax rate will generally be lower than the tax on your medical income. You can use the cash you receive from the rental income to make other investments. Additionally, the rental investment will serve as a tangible asset that you can pass down to your heirs.
3. Stable Investment
While real estate can depreciate and be affected by huge shifts in the market, it is generally a more stable investment than investing in stocks and bonds. Since it is not a liquid asset like stocks and bonds, its value is not likely to be influenced overnight by economic or political events. People are less likely to panic and sell off their properties, particularly since, however much the market fluctuates, they will still require a place in which to live.
Another important aspect of real estate investing for doctors is that you retain control over your real estate assets. It is different from investing in stocks, where you put your money in someone else’s business and have no control over it.
4. Tax Breaks
If you rent out your real estate investments, it means you are operating a business, and you, therefore, become eligible for various tax breaks. From your taxes, you can write off the property maintenance and upkeep expenses, the interest you pay on your mortgage payments, the insurance on the property, the marketing expenses for the property, and the property depreciation. So, you can decrease your tax liability and increase your profit margin.
However, you need to know that in case you sell your property, the profit you make on the investment is subject to capital gains tax. You can choose to defer capital gains by using a 1031 exchange and reinvesting the sales proceeds for a specific period.
5. Various investment options
As a real estate investor, you can choose to invest in residential, commercial, and industrial properties. Many long-term investors recommend that you invest first in a house that you intend to live in and after you finish paying off the mortgage, look towards making other investments. You can buy real estate properties for rent, resell, or development. You can also invest in property investment companies.
While real estate investing for doctors can be a lucrative and safe option, you must do diligent research before investing in any property. It is advisable too to seek the assistance of a reliable and experienced real estate agent and property lawyer.