4 Reasons To Invest In Real Estate
Most people are afraid to start investing their hard-earned money in fears of losing it. Others think they don’t have enough money to even begin investing. The good news is there are ways to start investing without the fear and without a lot of money! Investing in real estate is one of the best ways to use someone else’s money (the bank) to start investing in your financial future! There are many reasons to invest in real estate and I’m going to talk about a few. Many people including business owners choose not to invest in real estate because of the recent downturn, but I’m going to tell you some things that may change your mind.
As I mentioned earlier, one of the rare investment vehicles where you can use other people’s money couldn’t be easier. You can make a down payment, influence your capital, and grow your overall return on investment is amazing. That’s reason number one, and frankly, should be reason enough for anyone to at least consider investing in real estate.
Reason number 1: Tax free cash flow. Due to mortgage interest deductions and depreciation, cash flow should be tax-free. Most of the time an investor won’t ever pay taxes on their cash flow and can wait for gains in capital on the future sale of the property. Cash flow is the key; grow, tax-free. Don’t purchase rental property based on speculation of its potential value. Speculation is a dangerous tactic and cash flow is the way to go. A realistic expectation is appreciation of the property over the long-term and you should highly consider a strategy which includes tax-deferment. To decrease you tax liability, you may also want to consider a charitable trust, an installment sale, or a 1031 exchange.
Reason number 2: Rental real estate is basically a forced retirement plan. Most people are horrible at saving money and don’t plan financially sound for their futures. Many people don’t have the self-discipline to put a monthly deposit into a 401K or an IRA. Purchasing a rental property is a large commitment that requires the purchaser to maintain. All of the maintenance and hard work will pay off when you realize that you have built up cash flow and wealth.
Reason number 3: You can write-off taxes against your other income. According to your income level and classification as a Real Estate Professional or an Active Investor, your rental property could provide you with an overage of tax deductions that you can apply against your other income. I do recommend that if you choose to go this route, you discuss this with your tax professional before investing so you are on the same page and the right track.
Reason number 4: An increase of tax deduction strategies. Rental property could provide the investor with the ability to convert personal expenses to business deductions. Owning real estate is a business, so any expenses incurred such as travel expenses, can be deductible and you can also use property managers such as family members, which can increase tax benefits in terms of the future sale of the property and cash flow.
So there you have it; four great reasons why you should invest in real estate. Investing in real estate could potentially give you financial freedom if you make wise purchases and do your research, or hire someone who knows the “ins and outs” of real estate and taxes.
Kohler, M. (2013). Why You Should Be Investing Your Money In Real Estate. Retrieved from http://www.entrepreneur.com/article/228506.
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