Investing in real estate is a practice that is widely used by many people today.
Similar to many other types of investments, real estate investing can be very
profitable to the investors; however, it can also be a major liability.  With many
people currently calling real estate ownership a liability it still has many
advantages from an investment standpoint and should not be written off immediately
by those trying to diversify their investment portfolio.

The first major advantage of owning real estate as an investment is the tax breaks.
Capital gains that are made on real estate is only taxed for the profit that is made
on selling the asset. This means that if a home is bought on foreclosure for $25,000
and it is held for a few years and then sold for $100,000, the amount that is taxed
is $75,000 (100,000-25,000). These gains are generally filled out on the 1031 tax
form, and like most other investments the tax charged on the profit can range
anywhere from 5%-15% depending on your current tax bracket.

Another major advantage of holding real estate as an investment is the supplementary
income that is gained from tenants when renting the property. With rent generally
being collected monthly, if your investment has tenants, it can actually pay itself
off. For example if you own a rental property that has a monthly mortgage bill of
$750, you can charge your tenants that price or even more and use that money to pay
it off. Through renting, real estate actually pays the investors very well in terms
of risk, as generally real estate with reliable tenants can have virtually no risks.
With reliable tenants, your property value may actually increase with modifications
and upkeep they perform on your investment, which can include everything from lawn
care to painting interior walls.

Portfolio diversification, as stated earlier, is also a major advantage to investing
in real estate. With a portfolio containing other investments, real estate offers
investors to diversify and can offer major stability to a portfolio that contains
risky investments such as stocks and bonds. Real estate actually offers minimal
correlation between other investments and can be profitable even in hard economic
times.

The last major advantage of real estate to be addressed is that its performance can
be majorly influenced by its investor. There are many ways for an investor to add
value to their real estate investments, with value being added when many things are
done including adding new flooring, painting, installing energy efficient
appliances, re-paving the drive way, to even planting a garden.

With an economy that has been unstable with the recent economic recession, investors
have been shying away from many investments due to risk. Real estate, having many
advantages, can help in gaining investment income and diversify portfolios and
should not be ruled out by even the most casual investors.