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.
- 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.
- 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.
- 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.
- 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
At Morgan Franklin Fellowship (MFF), we support the concept of financial freedom – by teaching participants how to save by paying themselves first, invest for their future and grow their net worth.
Learning how money works and how to talk about money with others are the first steps towards recognizing an individual’s lifelong financial goals. Our online programs, podcasts, blogs, and book reviews and resources are designed to help you learn the concepts, rules and vocabulary of money, finance and investing.
Becoming an MFF Fellow
Our Standards of Financial Literacy – Learning about money series is engaging, full of interesting information, and easy to navigate. Adapted from the National Standards for Personal Financial Education developed by the Council for Economic Education (CEE), this robust curriculum features six short lessons on such important topics as earning income, understanding the value of saving and using credit. When completed, this program lays the foundation for becoming an MFF Fellow.
Becoming an MFF Fellow is the ticket to access additional MFF programs and opportunities for mentoring, networking, internships and real-world opportunities. Hear from the MFF Fellow themselves on how these opportunities encourage them to continue their journey to personal financial success.
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