Are you looking to build wealth for the future? The shocking reality is that 42% of Americans have less than $ 10,000 in retirement savings. And with rising cost of living and continuous inflation lower the value of the dollar, it is increasingly important to take charge of your future in order to build long-term financial security.
As we have seen time and time again, saving a little bit of money here and there is not the best strategy to get rich. Creation passive income stream and building up your investment portfolio is a much better approach, one that will allow you to build reserves much faster than you could with savings alone.
Enter: real estate investment buying a property and renting it out to generate cash flow each month, a strategy my company calls âRent Estate â¢â.
One of the things that makes a rental property so valuable is the fact that it can serve as both an immediate source of income and a long-term investment for the future. This is made even worse with every income property you buy: successful investors amass multiple rentals as quickly as they can with the goal of creating passive income that will replace what they earn in their daily work.
Rent Estate is not a get-rich-quick scheme, it is a long-term strategy for building solid wealth. And it has proven itself. If you are here for the long haul, real estate always gets ahead. After all, there’s a reason real estate consistently ranks among the top the # 1 investment vehicle of choice for most Americans when it comes to increasing their wealth.
In terms of long-term rewards in terms of fairness and appreciation, as well as immediate cash flow and tax benefits, Rent Estate can’t be beat. It’s also an investment where you can use leverage (read: other people’s money) to grow and generate returns on your investment at a much faster rate than you could on your own.
Benefits of owning a real estate investment
First, let’s explore some of the main benefits that real estate investing has to offer.
1. Equity growth
As you pay off the mortgage and your property, ideally, appreciates, you will build up equity. Equity is an extremely valuable asset. You can opt out someday if you need to, pass the wealth on to heirs, or better yet, borrow against it to secure additional property.
In most cases, rental property is an asset that appreciates. While it is true that property is subject to peaks and dips in the market, when you take a long-term view, property value has always recovered and is constantly increasing. Nationally, house prices have gone up 18.4% between 1980 and 2016.
3. Cash flow
Do you know the saying âmoney is kingâ? Well that’s true when it comes to ROIs. Of course, the benefits of long-term appreciation and growth in stocks are valuable, but they’re not the only benefits of investing in real estate. The real value of real estate comes from a combination of these rewards and the immediate, extremely valuable cash flow that you will get each month in rental income. Tangible income that you can use to pay off the mortgage or have in pocket once your property is paid off? Invaluable.
4. Tax benefits
Owning or managing a rental property also offers another advantage: the possibility of benefiting from tax advantages. Understanding the deductions you are entitled to can dramatically reduce your salary income, which means less tax payable. Consult your tax advisor for more information on:
â¢ Property management fees: Property management fees are tax deductible.
â¢ Maintenance and repairs : All reasonable repairs are deductible in the year in which they are made. This includes painting, plumbing, repairing drywall, doors / locks, broken windows and more.
â¢ Advertising: The costs of advertising your property can also be partially or fully expensed.
â¢ Amortization : You can deduct a certain percentage of your depreciation from the lost value. Land is not a depreciable asset and is not included in this deduction.
â¢ To travel: Any travel to / from local or long distance rental properties may be counted as mileage. The standard kilometer rate for 2017 is 53.5 cents / mile.
â¢ Interest: Mortgage interest is often the most important deduction available to homeowners. Interest on credit cards used for rental may also be deductible.
â¢ Assurance: Insurance premiums for your property can also be deducted. This includes fire, theft, flood and liability insurance policies as well as additional optional protection plans.
5. Other advantages
Another valuable benefit of real estate investing is leverage, the concept of using other people’s money to grow your investment. While you might have a hard time convincing the bank to lend you money to invest, for example, in stocks or stocks, they are usually happy to lend money for real estate investments and covers regularly. 80 or even 90% of the cost of a property – leaving investors only to pay the down payment. This means that your money can go a lot further and your returns could be much higher. So instead of having to pay 100% cash for one property, you can invest in multiple properties with just the down payment. This generates cash flow and appreciating returns of several assets, instead of just one, grow your wealth at a much faster rate.
Real estate investment is also a good way to to diversify your investments. Even if you invest in stocks or stocks, most financial advisers will advise against putting all your eggs in one basket. Rent Estate allows you to benefit from different sources of income, a great way to build security for the future.
Finally, real estate investing gives you the advantage of own a tangible fixed asset it puts you in control. With stocks or stocks you are largely at the mercy of the market, but with real estate you will always have something with intrinsic value – after all, people will always need homes.
In the second part, I will discuss how to build your real estate investment portfolio.
This article is intended for informational purposes only. It should not be used as a substitute for tax, accounting, investment, legal or other advice. Work with a licensed tax expert and licensed financial advisor to analyze the financial implications of a real estate investment.