Benefits Investing In Real Estate Assets
Jim Ingersoll
Real Estate Investor | Founder of Deal Maker Events | Helping Investors Build Wealth, Relationships & Impact | Author | Speaker & Mentor
1. Growth – Equity, Amortization, and Appreciation
All investments are expected to grow. There are a number of ways that single-family homes will grow your investment.
. A $100,000 house can be bought for $70,000, which creates $30,000 of equity upon purchase. Additionally, if you finance your purchase with with a bank, you will enjoy amortization that comes with principle pay-down, so you owe less on your investment each year. Managing the leverage is critical but can create huge gains over time.
Real estate tends to be hyper-local, so every market and every sub-market is different. If you can position your investments properties in the line of progress, revitalization and gentrification you can create above market gains in equity.
2. Tax Benefits
As you begin investing in real estate and holding onto your investment, you realize there are a lot of great tax advantages that accompany your investments. For example, rental income is considered to be passive income and not subject to self-employment tax.
Depreciation allows the investor 27.5 years of deductions on your property and the equipment that makes them habitable (heat pumps, appliances, etc.). Mortgage interest is typically the investor’s single biggest annual expense, but the good news is … it’s deductible. Depreciation is a double edge sword as it is re-payed when sold but then there is always the powerful 1031 exchange to help you!
3. Cash Flow
Cash flow is my personal favorite reason for investing in real estate assets. Investing in hard assets that produce income is a huge benefit of buying and holding single-family homes. Your tenants pay your mortgages and your cash left over after all your expenses is your net cash flow.
Imagine making $300 per month in net cash flow and not having to work much to produce it. If you invest in 15 houses, you could create $4,500 of monthly cash flow while enjoying all the other benefits of single-family homes.
4. Multiple Exit Strategies
A number of exit strategies can produce great results.
You can be a landlord and enjoy rental income; you can use lease options as your exit strategy; you can sell with seller financing and enjoy income from your note, or you can sell the house outright to a new buyer (flip it).
What are your favorite parts of investing in real estate?