4 Ways Real Estate May Build Wealth

I’m always on the hunt for relevant info and I loved this - one of the best articles I’ve seen on this topic for a while. Here are a few paragraphs as a taster...

The reality is most real estate investing is not this quick or glamourous. A common misconception about real estate investing (at least partially due to these media sources), is that an increase in property value is the only way to make money in real estate. While that is certainly part of the equation, real estate has the potential to build wealth in certain market conditions through the following ways:

Cash Flow - Like a bond or dividend-paying stock, well-leased properties have the ability to generate consistent income. Assuming rents received from tenants are sufficient to pay all operating expenses and debt payments, the excess cash flow provides a return on equity invested.

Appreciation - As mentioned in the opening, price appreciation is the source of return that often receives the most attention. Although property values can decrease on a year-over-year basis (as witnessed during the global financial crisis), commercial real estate has historically demonstrated value appreciation in excess of inflation over the longer term

Principal Reduction - Given the dollar amounts involved, investors often finance a portion of the investment. Debt enables investors to acquire larger assets and also has the potential to magnify cash-on-cash returns.

Tax Benefits - Properly structured real estate investments can also provide tax benefits. Cash flow can be sheltered through income tax deductions from interest payments and depreciation allowance, and upon sale of the asset, capital gains can be deferred through a 1031 exchange.

Pretty valuable stuff, I’m sure you’ll agree! Why not check out the whole article https://www.realized1031.com/blog/four-ways-real-estate-may-build-wealth and share your thoughts with me afterwards: call (0295) 686 266 or email me at [email protected].

Thanks,

Alex