Real estate investing offers numerous tax saving benefits. Interest expense on the money borrowed to purchase real estate can be written off on your taxes.  Operating expenses and depreciation can also be deducted.   Last but not least, you can cash out refinance and pull the equity out of property without paying taxes on that gain (until you sell the property).   Now, these are basic concepts around the tax benefits of real estate.  A professional tax advisor should always be consulted to help you create the best strategies for your personal situation.

Every month when the mortgage is paid on a property, part of that money is going to principle and increasing your equity.   Using a buy and hold strategy in real estate and renting or leasing your property allows you to increase your equity and wealth by having someone else pay off your mortgage.  

Cash flow equals the amount of income above and beyond expenses.   Rental properties can produce monthly cash flow and once they are paid off via tenants paying down the mortgage, cash flow is greatly increased!

Appreciation is simply the increase in the value of an asset.  Real estate appreciates in two ways.  One way real estate appreciates is through market appreciation, the value of houses rising over time.  Another way that real estate appreciates is through improvements or renovation.

Financial Leverage

Financial leverage refers to borrowing money to increase the potential return on investment.  Proceeds from funds borrowed are invested with the intention of producing greater returns than the interest paid on the loan.

Using leverage in real estate, you can borrow money against real estate to make money.  Let’s say that you have $10,000 to invest.  If you purchased a $100,000.00 home using your $10,000 as a down payment and that home appreciated 10% to a value of $110,000.00 your return on investment would be 100%.  Your $10,000.00 investment made you $10,000.00.   If you used the same $10,000 and purchased stock and had a 10% return, you would earn only $1,000.00. 

Maybe you’re saying, “All this sounds good but……what about all this bubble talk?” Let’s face it – the market goes up and the market goes down.  That’s life.  Life has its ups and downs.  The stock market has its ups and downs.  There’s not much that doesn’t have ups and downs.   What is more important than ups and downs is learning how to operate and create wealth in any market.  Buying right is always important and buying right is just a facet of understanding the market conditions and which strategies work best in various market conditions.

There is a ton of information available to anyone who wants to learn how to invest in real estate.   Consider your self lucky to have so much information readily available.   Today, you can find almost any medium you choose to study real estate investing including books, home study courses, seminars, teleseminars, mentors, coaches, - you name it!  

“Don’t wait to buy real estate, buy real estate and wait!  Author Unknown