“The Benefits of Investing in Realestate”
Updated: Apr 30, 2018
1. Cash Flow
Many people invest in rental properties simply because of the cash flow.
Cash Flow = the extra money that is left after all the bills have been paid.
The cash flow can provide ongoing, monthly income that is mostly passive, allowing you to spend your time building a business, traveling or reinvesting in more real estate.
2. Tax Benefits
If you earn $150,000 at your own business and I earn $150,000 through rental properties, who get’s to keep more?
ME!
Because the government rewards rental property owners. Not only is the cash flow received from your rentals not subject to self-employment tax, the government offers tax benefits including depreciation and significantly lower tax-rates for long-term profits.
3. The Loan Pay Down
When you buy a rental property using a mortgage, your tenant is actually the one paying the mortgage payment, thus increasing your net worth each month. Because of the loan pay down a rental property is essentially a savings account that grows automatically, without you depositing money each month.
Today you might owe $150,000 on a rental property, but next year you might only owe $145,000 because the tenant is making the payment for you, making you $5,000 richer. Thirty years down the road, or whatever the term of your loan, it's paid down to $0. You own a significant asset that you can sell or continue renting, all thanks to your tenant paying the mortgage.
4. Appreciation
While the loan is being paid down the value of real estate, generally, goes up. However, values can go up and down, but over time, values do climb higher and higher. 30 years from now, everything will be worth far more than your'e paying for it today.
5. A Hedge Against Inflation
Inflation is the process by which prices increase due to the value of money decreasing. While most people fear inflation, as a rental property owner, I look forward to it! When the price of a gallon of milk hits ten bucks a gallon, guess what else is going to shoot through the roof? Everything, including rents and property values!
The one thing that won’t increase, however, is my fixed-rate mortgage payment. As inflation pushes the cost of living higher and higher, my cash flow will only increase. This is why real estate is often called “a hedge against inflation."
6. Control
I choose to invest most of my income in real estate, knowing that I am the one who is responsible for my success or failure. If I want a better deal, I need to hustle to find it. If the rental market gets more competitive, I can compensate by increasing my advertising. If values drop, I can choose to wait it out or improve the property to drive the value back up.
In other words, I get to control the situation. Don’t think that just by owning some rentals you are instantly going to begin building wealth. Real estate is powerful - but only if you work it right.