I
nvesting in real estate can generate significant additional income for some individuals, with thousands of dollars possible each year. In today's inflationary environment, this could be a strategic move according to experts. "Real estate investments provide a hedge against inflation if rents keep pace or outpace the rate of inflation," says Derek Graham, principal and founder of Odyssey Properties Group. Multifamily properties like apartment buildings tend to be more resistant to inflation due to their ability to adjust rents quickly.

    The typical lease term for an apartment is 12 months, allowing rent adjustments to reflect current market conditions. In fact, about 70% of rental properties in the U.S. are owned by individual investors, according to HUD. However, not everyone wants to be a landlord; there are alternative ways to invest in real estate and generate income.

    Before investing, it's essential to weigh the pros and cons carefully and consider whether this type of investment fits your lifestyle and financial goals. Investing in real estate can provide several benefits: an additional stream of income through rental properties or room rentals, diversification of your portfolio by reducing correlation with the stock market, and potential tax savings.

    Real estate investments may offer deductions for mortgage interest and property taxes, as well as lower taxable income through depreciation. Additionally, the 1031 exchange allows investors to defer capital gains taxes by using sales proceeds from one property to purchase another 'like-kind' property.