If you are reading this article, it is because you are at the crossroads of investments: on the one hand, we have real estate investments ; on the other, financial investments .
How to decide which path to take? Let someone who has walked both sides of this fork provide some insights.
What are the Advantages of Investing in Real Estate ?
Let's move on to real estate investments and the main advantage of investing in real estate: Tax exemption on residential properties. In no other type of investment is a tax exemption granted in the case of capital gains as in real estate. Let's say you bought your house for R$100,000 20 years ago and today you are selling that property for R$1.2 million, which will be fully used to purchase another residential property. Do you know how much tax you owe in this case? Zero! This occurs, obviously, not in all cases of real estate, but in some specific cases. Normally, there is an exemption from income tax on capital gains when the amount obtained from the sale of a residential property is used to purchase another residential property in the country, as long as certain criteria are met:
- The property sold is residential.
- The new property is residential.
- The taxpayer has not sold, in the last five years, another residential property exempt from income tax.
- The sale value is used in full to purchase the new property, within a specific period.
It is important to consult an accountant or tax attorney for accurate and up-to-date advice, as tax laws can vary and changes to tax rules may occur.
Let's address the second great advantage of investing in real estate : the possibility of periodically receiving rent. In this case, although there is no tax exemption for the property investor , the attractiveness of passive income , the one you receive even without working, is too interesting for the investor not to consider. Furthermore, when well chosen, properties act as a safe haven in times of crises and inflationary threats . This is due to the fact that they have a high-value tangible asset beneath them: land, which tends to appreciate in value over time.
What are the disadvantages of investing in real estate?
The main difficulty in real estate is this: maintenance . While the land beneath them does not depreciate, properties suffer a gradual and constant depreciation , which requires the investor to always be spending, whether on a repair to the masonry, a wiring that breaks, or that leak that no one knows where it comes from. This means that the investor must always be reinvesting part of the income , in addition to being personally involved in maintenance.
Another disadvantage of investing in real estate is the possibility of default. Currently, it is easier to get around this problem, with rental insurance , bail insurance , among others. However, when taking out bail insurance, there is an additional cost, which affects rental income and, depending on the renter 's credit rating, may make renting with insurance unfeasible. Therefore, it is always important to take the possibility of default seriously and take measures to avoid it.
In short, when investing in real estate , we have the advantage of the possibility of tax exemption in the event of a possible sale. Additionally, we have the possibility of generating passive income. Added to this is the fact that properties represent a safe haven in times of crisis. However, the disadvantages are the high costs and complexity of maintenance, combined with the possibility of default. What about the other side of the investment crossroads ? The financial investment side? Read the article highlighted above by clicking on the image.
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