Real estate investing, even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth. – Robert Kiyosaki
Are you currently invested in the real estate market? Are you afraid of investing your money in the real estate market? Are you tired of seeing almost no return on your money at the bank? Do you like the idea of seeing results by investing in the real estate market? Here are eight different reasons why investing in the real estate market is an excellent way to grow your wealth.
1. Cash Flow
Real estate investment properties usually have leases that secure the investment. This investment provides an income stream that is higher than it would be had you invested in stocks.
2. Having Leverage to Increase Asset Value
With commercial real estate investing, you have the ability to to use your asset and to place debt on it, which can be a few time the original equity. Having this leverage can allow you to buy multiple assets without as much money and multiply asset value while increasing equity as the loans are being paid.
3. Multiply Cash Flow by Leveraging Low-Cost Debt
By placing positive leverage on an asset, an investor can increase positive cash flow from properties by borrowing some money at a cost lower than the property actually pays out. If you have an income property that generates a six percent cash-on-cash return and have a four percent debt placed on it, you would be able to get paid six percent on the equity and about two percent on the money that you borrowed, having leveraged the debt.
4. Hedge Against Inflation
Countries around the world are always printing money to stimulate economic growth. An income producing real estate property can hedge against inflation. Usually, when inflation occurs and the value of the dollar goes up, so does the price of real estate.
5. Physical Assets of Properties Have Value
As a hard asset, income-producing real estate has meaningful value. The land of the property has value, the structure has value, and the income that it produces has value as well to future investors. Income producing properties do not have green and red days like the stock market.
6. Tax Benefits
Real estate owners benefit from the US Tax Code in several different ways which include mortgage interest deductions and shielding a part of the cash flow that is generated and paid to the investors with depreciation accelerations. When the sale happens, the IRS allows the investor a 1031 provision, which enables the investor to put off all taxable gains into the future.
7. Appreciation of Asset Value
Inflation is a part of the economy, and it can drastically reduce purchasing power. Real estate investments have always provided exceptional appreciation in value that usually exceed other investment types. The value of the property tends to increase in value as net operating income of the property increases with effective management and rent increases.
8. Pride in Ownership
Having the right property that is in the right location the houses the right tenants can give someone great pride of ownership in that property. Take into account that being a homeowner is unattainable for many people, if you can have multiple real estate properties, imagine the amount of pride that you will have.