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.