Real estate is one of the best investments you can make! With the volatility of the stock market, real estate can be a safer investment vehicle and an even more lucrative one. Franklin D. Roosevelt once said, “Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” Real estate investments have many advantages that help make it the IDEAL investment!
What is IDEAL? IDEAL stands for Income, Depreciation, Equity, Appreciation, Leverage and are the 5 benefits that real estate investing can offer you:
- Income
Investing in real estate can generate cash flow and offer you a passive income stream. Real estate can make money a few different ways, the most common for residential property is through collecting rent. There are tax advantages that come with real estate investing that can help shelter your income from taxes that we’ll discuss next! - Depreciation
Real estate investing comes with some amazing tax benefits. You can deduct property expenses and reasonable repairs. However, the most unique tax benefit is depreciation. The IRS allows you to depreciate your residential rental property over 27.5 years, and this creates an annual depreciation expense. This is a “paper” deduction which means it does not cost you anything and it can help shelter your income from taxes each year! - Equity
If your purchase rental property using a mortgage, equity is built up over time as your loan balance is reduced with each mortgage payment. Tenants essentially buy your house for you as their rent payments help pay down your mortgage and contribute to the equity in your home. What other investment can you use other people’s money to build your own net worth? - Appreciation
Appreciation is an increase in property value over time. Appreciation of property is icing on the cake! One way to enhance the appreciation in value is to buy low and sell high, just like you would when trading stocks. This can provide you with even greater returns. - Leverage
Another benefit of real estate investing is the ability to use lending or borrowed capital to increase your potential return of an investment. It gives you the ability to own a home with just a small down payment. This also allows you to invest in multiple properties, instead of tying up a large sum of cash in a single property. Use of leverage can help accelerate growth and make you more money.
There is never a better time to start investing! We can help you learn more about investment opportunities in the DFW area. We are active real estate investors with years of experience investing in single family homes and multifamily. We can help you invest, lease, property manage and sell. With the pandemic, there have been many different orders impacting renters and landlords. We keep on top of national, state and local orders, and can help you navigate what you can or can’t do with your rentals in this unprecedented time. Contact us today at (214) 449-1022 and ask us about investing!
