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Posted over 12 years ago

Top 5 Reasons To Invest In Real Estate

Anyone can invest in real estate and now is one of the best times to learn how. Property values throughout the U.S. are lower than they have been in the past 50 years. This is not news to anybody, but what seems to be news is the prospect of taking advantage of these low prices and buying real estate at huge discounts while you still can.

Understandably, people have been a little shaken over the recent crisis in real estate and the lending practices that took place. Taking a bit of time to educate yourself on the advantages of investing in real estate and you’ll discover that with some of this knowledge you will no longer have to be so apprehensive about investing

Let’s look at the top 5 reasons to invest in real estate.

1. Cash Flow – whether you buy with all cash or use today’s favorable financing with a low mortgage payment, positive monthly cash flow will occur when the monthly debt is subtracted from the monthly rent. Thus giving you a monthly income from your real estate investment. (Note: We can show you one of the BEST methods of generating passive, positive cash flow!)

2. Appreciation – Appreciation is the increase in the property’s value, which generally occurs over time and can be increased by investors who add value to the property through repairs and enhancements. This is also a way to create equity in the property.

3. Depreciation – Even with an increase in the property’s value the government allows owners a tax deduction of their property over its life span.

4. Tax Benefits – In addition to depreciation, an investor can usually claim the interest portion of his monthly mortgage payment as a tax deduction.

5. Leverage – Leverage is a powerful reason for investing in real estate. If an investor used 100% cash to acquire a house worth $100,000, and the house increased in value by $5,000 in one year, then the investor made a return of 5% (assuming no other costs in this case). However, if the investor obtained 80% financing, only $20,000 cash would be required at the closing table, and a bank or other lender would loan the remaining $80,000 to acquire the property.

Assuming the same $5,000 increase in value, the investor’s cash contribution of $20,000 would yield an increase in equity of $25,000 in one year, a 25% return on investment. Taking advantage of the other benefits to investing in real estate, such as cash flow and the increase is even much greater.

With the above example, if the investor is able to bring in even a conservative amount of cash flow per month of $200 this will result in an additional $2,400 per year added to the increased appreciation. Even if the property value stayed stable with no appreciation, you would still see a positive return on your investment.

Adding to these benefits the recent low prices of real estate and the low interest rates for financing and you can see how easy it is to accumulate wealth and become a successful investor.


Comments (20)

  1. Reading this 6 years later but job well done here Bill!


  2. thanks


  3. @Jonathan Kolf, you can write off interest payments against your taxes paid when you file your tax return.

  4. I am new to BP and really enjoy reading these articles as well as the experiences that others share.  Thanks so much for enlightening us newbies!


  5. About #5 Leverage, it seems to me that you're assuming that the bank that put up $80,000 is doing so for free.  After the bank gets it's interest payment, how much of that $5,000 is left?


  6. This is a great post. Im new to REI and I was unsure of what leveraging meant. Thanks for providing clarity. 


  7. All Great points. Thank you for the article Bill . It is much appreciated. 


  8. Dear Bill, 

    Thank you for explaining these 5 concepts. It made it clearer.  

    What do you recommend in terms of linking reasons to invest with a particular approach. How determined is the reason for the later stages in being successfull as a real estate investor and formulating the investing strategy?

    Many thanks.

    Best regards,

    Trevor


  9. Great post Bill. Thank you. 


  10. Leverage huh? interesting...


  11. Good Post!


  12. very straight forward. I like it a lot 


  13. Greetings everyone. I am just getting started and already have a question after this post. What is one of the "Best" ways of generating passive, positive cash flow!) as described in number 1. ? Is there a link to go to where I can read about this?


  14. Thank you so much for this article. I'm new to BP and to real estate investing. I live in Los Angeles where the housing market seems to be inflated compared to the rest of the country. Do you still feel the same enthusiasm regarding the state of real estate prices? I'm eager to begin investing but feel a little discouraged by the local market. 

    Thank for again and any feedback is greatly appreciated!!!


  15. Thanks, Bill! 


  16. The video of Glenn Twiddle about real estate training is nice and informative. His pronunciation is very good. I am looking forward to seeing additional video about real estate training. For more detail, please visit: <a href="http://www.glenntwiddle.com.au/">Real Estate Training</a>


  17. everyone globally has found the US to be a great place to invest in, we as Americans should as well.


  18. Nice post


  19. Good post Bill. Especially fitting for Independence Day.