Did you know that Real Estate Investing is the surest and safest road to financial freedom – especially your retirement future? Most people believe that real estate investing is all about timing the market correctly. Anybody who invests in real estate based off the market rising is “speculating”. These types of investors are gambling that prices will continue to rise in a short period of time. There is a difference between speculating and investing in real estate. Those who invest in real estate do so for the following reasons:
Cash Flow – Every month the rental income generates a passive income. This is similar to dividends in mutual funds or stocks.
Appreciation – A rise in the value of the property. This is similar to a portfolio of stocks or mutual funds going up in value.
Leverage – Probably the most important aspect of investing. Using the banks money or OPM, other people’s money, to maximize your Return on Investment thus reducing your overall risk.
If you invest $10,000 into stocks and in 5 years the value of your stocks rose to $11,000 then you made $1,000 profit or 10% Return on Investment. BUT it cost you $10,000 to make $1,000. This is very risky and comes with little rewards.
Now, if you bought a $100,000 condo and you put down that same $10,000 and in 5 years the value of your condo rose to $110,000 then you made a $10,000 profit or 100% Return on Investment.
This is the power of leverage and this is what educated investors know and uneducated investors DO NOT understand.
Tax Benefits – The government respects and rewards landowners. They create jobs and provide housing. Because of this the government allows certain tax breaks for those who own ANY real estate. If you own a home you can write off all the interest. If you own income property you can depreciate it over 27.5 years. This reduces your overall taxable income.