Reason #1: Real estate appreciates in value

The overriding trend in decades past has been for real estate to appreciate in value. While some geographic areas are a bit stagnant at the moment, the overall trend towards market appreciation is expected to continue, resulting in profits for real estate investors when they cash out their properties.

Reason #2: Tax deductions

Real estate investors benefit from a number of tax deductions, including (but not limited to) travel expense to manage, inspect or purchase property, property repairs, mortgage interest, and depreciation.

Reason #3: Tax -deferred proceeds

By doing a 1031 or like-kind exchange, you may actually defer paying interest on the gain made at sale of a property.

Reason #4: Instant equity

Some real estate investors manage to achieve "instant equity" by buying foreclosures at a discount. If you purchase a commercial property appraised for $100,000 at 25% below fair market value, the price of the property would be $75,000. If you put $10,000 down, you would actually have $35,000 equity in the property the day you close escrow, even though you didn't invest nearly that much cash out of pocket.

Reason #5: Leveraged tax benefits

Some investment vehicles require by nature that you have the entire amount of cash on hand to invest. For example, if you wish to invest $100,000, you must have $100,000 cash on hand to invest. Real estate is different, however. You can put 10% down, have the bank finance the rest, and still receive all the tax breaks and benefit of appreciating property value. Now that's leverage!

Reason #6: Rental income opportunities

Like real estate property values, rental income has been on a steady rise. Savvy real estate investors can earn a steady stream of unearned income (which is defined as income that comes from other sources than our jobs).

If you are looking to diversify your investment portfolio and have not yet invested in real estate, give it a second look. The tax advantages can be especially appealing, you may receive a regular income stream from your investment, and the long-term profit potential can be pretty attractive as well.