Investing in real estate can be a wise decision and those who take it slow and learn all there is to know are the most successful investors. No matter if you’re a commercial or residential investor, this article has some advice to help you out.
Do you realize, if you own real estate, you are richer than you know? You are building wealth through real estate faster than ever before. Real estate has intrinsic wealth growth through appreciation and mortgage pay-down. We all understand how real estate appreciates over time. While interest rates remain at historical lows, with each monthly payment you are decreasing your principle and increasing your equity at an amazing pace. But Wait! Slow down! Before you get excited about a home remodel, vacation or new car, let’s think about how best to use monies harvested from your property. The number one financial challenge most Americans have is saving money. Your property can reduce the need to save money by creating alternative income for now and for retirement. This income will never run out. How does that work you ask?
OWNING REAL ESTATE HAS FIVE ECONOMIC BENEFITS:
Cash Flow or Rate of Return: Cash flow is your profit after collecting rent and paying the mortgage, taxes, insurance and maintenance. If you clear $200 a month on one unit, imagine having 10 units, 20 units or 50… Federal Tax Benefits: Depreciation and interest write offs helps to reduce your tax burden. Leverage of OPM (Other People’s Money): You can pay for your investment over 30 years with a mortgage loan. Can’t do that buying stocks or gold! Principal Pay-down: A portion of each payment goes to your principle, getting you closer and closer to owning free and clear. You build equity with each payment, building your wealth! Appreciation: Yes, real estate values go through cycles of ups and downs, but over the long term real estate grows in value, hedging your wealth against inflation. How you profit from real estate depends on YOU.
When you buy a stock, you never know, for as much as you study the company, if its CEO isn’t about to leave and the next one will run the company to the ground, if there is a merger with a less profitable company in the pipeline, or if an earthquake will destroy the production plant in China. Your real estate investment will be a result of your own efforts to renovate a place, promote it, screen a proper tenant, and keep it up over the years. And real estate is tangible. When all the markets tank, you are trying to hold to your losing positions in hopes they will go up in a few months, or hurrying to sell at a loss before it gets worse. Real estate will bring you a monthly rent to cover the mortgage, even if you have negative equity. And in periods of economic turmoil, when people lose their houses to foreclosure or first time buyers are denied mortgages by the banks, you will have more potential renters than ever. When things go back to normal, home prices will increase and you can make a nice exit, sit it out until the next crisis, and go back in the game to buy low. Don’t want to time the market? Just buy.
Now is as good a time as any. You can reach your goals faster with a written Real Estate Investment Strategy Plan turning your equity into income. It doesn’t hurt to diversify your investments.
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