5 Reasons To Invest In Real Estate
Why you should invest in real estate and 5 ways it makes you money.
Real estate. It’s all around us.
We go to work in real estate, we come home to real estate, we eat out at real estate, and go to the movies in real estate. Like a fish doesn’t know it’s wet, we forget that everywhere we go we’re stepping on multiple pieces of real estate. Every day.
But it’s more than the availability of real estate. The opportunities are tremendous when you invest in real estate.
Why Real Estate Investing?
You may have heard that more millionaires are made through real estate than any other financial instrument. Statistics vary, but up to 90% of all US-made millionaires come through the ranks of real estate investing (Financial Uproar). There’s a reason why.
Compared to the traditional financial markets, real estate has several distinct advantages. Special shout-out to Lifestyles Unlimited for the info…
1. Cash flow: Real estate provides cash flow. When you buy an ounce of gold, it doesn’t pay you anything. In fact, it costs you money to store it. When you buy a house and put it up for rent, you collect rental income as long as you own the house and have a tenant.
2. Equity capture: Equity capture is when you buy an asset (house, apartment, etc.) for less than it’s worth. For instance, when you buy a house in a $150K neighborhood for $75K, fix it up for $25K and you’re “all in” for $100K. That gives you $50K in equity capture.
3. Appreciation: In general, real estate doubles in value every twenty years. It is forced to rise over the long term with inflation of building materials, labor, and scarcity of land. There can be short-term fluctuations, but real estate generally appreciates.
4. Principal Pay Down: When you buy a house, you usually take out a loan. With residential real estate, your tenants pay off the loan giving you a natural equity accumulation through principal pay down.
5. Tax advantages: Lawmakers write laws for themselves. And most lawmakers are real estate investors. That’s why real estate capital gains taxes are reasonable (15%) and sometimes even income tax deferred indefinitely through 1031 exchanges. Note: I am NOT an attorney or CPA – check with your tax professional for the best advice.
There are a number of other ways to invest in the markets besides real estate. But real estate is superior to all of them. Just remember: most stocks don’t cash flow, they can’t be bought for less than they’re worth, they don’t always appreciate, other people don’t pay down your margin principle, and you don’t have natural tax advantages in stocks like real estate.
In short, real estate investing beats most other investing hands down.
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