Introduction: How real estate investing works
The real estate market is always changing and it’s important to stay up-to-date on the latest trends. This article will provide a brief overview of what real estate investing is, as well as some tips for those who are considering investing in property.
Real estate investing can be broken down into two categories: flipping and rental properties. Flipping involves buying a property, renovating it and then selling it at a higher price. Rental properties involve renting out the property until the tenants move out or die, then you can sell the property or rent it out again.
Appreciation of property value with time
The appreciation of property value with time is not an unknown phenomenon. It is a very popular topic and has been studied extensively. When you buy property to hold long term, time is your friend.
A study conducted by the Joint Center for Housing Studies of Harvard University in 2017, found that over the last two decades, the home price index has increased by more than 200%. The average homeowner will see their property value increase by $217,000 over a 20-year period.
Build Equity and Wealth for generation
Successful parents need to start thinking about how they can build equity and wealth through their own life choices so that they can pass this on to their children and grandchildren. This can be done by building a portfolio of rental properties and passing it along to them proving rental income to generations to come.
Cash Flow in real estate brings income on regular basis
Cash flow is the amount of money generated from a property per month. Cash flow is the difference between the net income and expenses that are required to maintain the property.
The cash flow can be calculated by dividing the net income by monthly expenses. Net income is determined by subtracting all expenses from gross rents. Monthly expenses are determined by adding up all monthly costs and dividing them by 12 months.
Cash flow properties are usually desirable because they bring in a regular stream of income, which can help you build equity over time.
Real estate can be seen as a hedge against inflation.
The real estate is a good hedge against inflation. The rate of return on investment in a house is higher than that of other investments, such as stocks and bonds.
Real estate prices have been increasing steadily over the years and they are not likely to stop anytime soon.
The value of real property can be used as a form of leverage.
The value of the real property can be used as a form of leverage in negotiation. this allows you to borrow money against 1 property to get another investment property. That is how you build generational wealth.
Real estate investments can generate passive income.
Real estate investments can generate passive income if done right.
Passive income gives you the opportunity to do what you want to do.
- Travel exotic places.
- Or just sit in your backyard, and enjoy the bright sunny day.
Income in Retirement.
Passive income is the holy grail for retirement. It can provide a life of freedom from the pressures of maintaining a full-time job.
The idea behind passive income is to create a stream of revenue that will generate money without requiring any work on your part. Real property can generate real income.
Tax Breaks and Deductions in real estate investment are a huge benefit
Real estate can have one of the best tax breaks and deductions.
- Depreciation of property over 27.5 years (39years for commercial), reduces earned income.
- Cost of maintenance of the property
- Business travel for your properties
- Defer capital gains by use of 1031 exchange.
The Bottom Line
Even though there are many benefits of investing in real estate there are some considerations that you might want to give.
- Real Estate is not liquid. You can just overnight sell the property and get your cash out. Your passive cash flow should help in not having such a situation.
- You need the learning and knowledge before you can take the plunge. Learn from our community of investors and get mentoring from them.
- You need to operate as a business, and it has its own complexity. Build a team to help you.
Real Estate investment can be a great source of wealth building that will serve you and the next generations well. Allowing you to have a financially secure life and retirement.