Why Buying Southfield Property Can be Better Than Investing in a REIT

You’ve probably heard that Southfield real estate is a good investment. Southfield property tends to appreciate in value over time if you hold on to it, or you can make money by flipping properties. There is also the option of investing into a REIT, which is a real estate investment trust.

If you are considering investing in Southfield property, read below to compare the advantages of buying a Southfield property directly versus investing in a REIT.

How a REIT Works

A REIT allows an investor to purchase shares in a company that owns real estate instead of buying the real estate property themselves. These two options of investment opportunities are drastically different from each other.

While REITs can be a good option for some investors, today we are going to focus on the advantages of buying the Southfield property directly instead of investing in a REIT.

Diversify your Investments

A good reason to invest directly into Southfield real estate is to diversify your portfolio. To truly diversify, you need to have investments that will react differently to the market.

Take Advantage of Financing

When you invest in REIT, you need the funds in order to invest. However, if you purchase a Southfield property directly, you can put your funds towards the down payment and then obtain financing for the remainder of the purchase price.

This option allows you to invest in more properties and possibly experience a far greater return than you would investing the cash you have on hand into a REIT.

Higher ROI

REITs have expenses to cover, and tend to stay conservative on the percentage that they use for their annual dividend. Many REITs are between 2 and 3 percent, and they could be less.

When you own individual Southfield properties, on the other hand, you could see returns around 5 to 8 percent.

You Can Build Equity

One of the biggest advantages to owning Southfield property individually is that you are always increasing the equity that you have in the property. You have tenants living in the property that are paying your mortgage and covering the expenses of the house. As long as you have your rent set right, you are also making an additional profit on top of that.

And while you are benefiting from your investment in the present, you are also working towards a larger return on investment if you sell the Southfield house in the future. The equity you are building also gives you the buying power to invest in more properties as you go.

Tax Advantages

When you invest in a property, there are many tax advantages that you can take advantage of. For starters, you can depreciate your assets and deduct your operating expenses. You can also take advantage of the 1031 exchange when you sell one property to invest the funds into another one, thus allowing you to avoid capital gains taxes.

If you are interested in purchasing Southfield real estate, you do need to know that the recent tax reform that was passed in December does play a role on what can be deducted on your taxes. For example, mortgage interest can only be deducted on mortgages up to $750,000. Speak to a tax professional about your investment options to see how it will impact your bottom line.