Why should I consider investing in real estate? It can seems overwhelming and confusing, which leads many people to not consider the huge benefits it can have over other investment opportunities.
With stocks, they go up or down and you may receive some dividends. Investing in precious metals? You either sell high or low. Real estate? There are many different levers you can pull to grow your wealth. All of them can work in your favor. Some are bigger and some are smaller. However, added up, they have a much more compound effect that can make a significant difference in the returns you're going to get on this asset. So what are the top reasons?
1) Rental Income: Each month, your tenants or guests are going to pay you money to stay in your property. Ideally that income coming in is much more than what you need to cover your expenses each month (if you're buying correctly with an emphasis on cash-flowing properties).
2) Mortgage Pay Down: One of your expenses each month is your mortgage, and as you make that payment each month, part of that is going to pay down your principal on your loan. While it may not be a ton in the beginning, each few hundred dollars adds up over time to an additional few thousands of dollars each year (depending on the size of your mortgage). Is happens as a natural bi-product of your rental income exceeding your expenses.
3) Leveraged Appreciation: Most people understand appreciation, but the real beauty comes in the form of leveraged appreciation. In most cases, you're going to make a down payment of roughly 25% on your rental property. However, the appreciation that happens is based on the FULL VALUE of the asset. While the bank or lender may hold the mortgage on 75% of the property, they're not going to ask to receive 75% of the appreciation on the property. That's all you! So if a property appreciates by 5% in a year, your 25% of cash invested on a property is going to yield a 4 to 1 return, so you actually earn 20% a year on that cash you invested into the down payment.
4) Inflation Protection: Typically, when the cost of goods and services go up, so to rents and home prices.Therefore, as inflation increases, your investment into real estate will help to offset that increase to some degree, offering you a small hedge of protection against inflation.
5) Depreciation On Taxes: Each year you own your property, you're going to be able to take some depreciation on your taxes, allowing you to send less money to Uncle Sam! If you look into a Cost Segregation Study, that number can get accelerated even further.
6) Additional Tax Benefits: In addition to the depreciation, you'll be able to deduct many of your expenses incurred on your property. Need to drive to your property for a visit? Don't forget to deduct that mileage as well!
7) Tangible Asset: Real estate is tangible. You can physically look at it and touch it. Many investors love that fact as opposed to other things like stocks and cryptocurrency. It's value isn't going to go to zero because real estate is built on land, and that land will also always carry value.
8) Leave a Legacy: What if you decide to be the person that changes your family tree forever. Your grandkids and their grandkids look back and say it's because of YOU that they have a different experience growing up. You're the one the made a difference for future generations by deciding to invest and pass your properties, or even knowledge of wealth-building down the line. No kids or not excited about handing them things in life they didn't have to work for? There are a lot of other amazing people and causes you can support through your generosity from your real estate success!
As you can see, there is no shortage of amazing impact that real estate investing can make. This should motivate you to get your journey moving to the next step today! Don't know where to start? Email us at [email protected] and we can help you identify a path to get you going on your journey.