Four Benefits of Real Estate Investing

The benefits of investing in real estate as a way to build wealth are many.  When investing in the right property,  investors can enjoy predictable cash flow, excellent returns, tax advantages, and diversification. 

Four Benefits of Real Estate Investing are:

  1. Cash-on-cash This measures as a percentage the cash income earned on the cash invested in a property for one year. It is one of the most important real estate return on investment calculations. As an investor you should look at the cash-on-cash return to determine if the investment is worth the risk.
  2. Tax Advantages – Depreciation is when you deduct a part of the cost of an asset over a period of time. You can deduct a part of the cost every year until you fully recover the total cost. Depreciation is a non-cash expense. By creating a tax depreciation schedule, you can maximize the cash return from your investment property each financial year.
  3. Amortization helps investors to understand and calculate their cost of paying off debt over time. Amortization schedules describe what portion of a loan payment is interest or principal. This can be useful for deducting interest payments for tax purposes. — An amortization schedule illustrates that while the monthly payments stay the same, the amount that goes to interest payment goes down over time while the amount that goes to paying towards the principal goes up over time.
  4. Appreciation is the final benefit of real estate investing is usually property appreciates – or increases – in value over time. There are occasional market corrections where values will go up or down, and people can buy the wrong type of property at the wrong time.

When investing in real estate, the value is in finding a quality property at a discount, then making improvements to increase equity, and eventually selling it for a profit. This is the real estate equivalent of the stock market mantra to “buy low and sell high.” However, while a stock value may go down to zero, a property is a tangible asset that will always have value in the raw land and any improvements to the building structures attached to the ground.

A Journey to Personal Financial Success

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