Why are so many getting into real estate investing? Does every wealthy person you know own real estate? Real estate has always been a tried and true avenue for investing. The reasons investors choose real estate are for the immediate cash flow benefits and/or to generate equity by holding a property until it grows in value.
While it is fantastic to get checks in the mail in the case of for long term rentals, or payments multiple times a week in the case of many short term rentals, this is just the beginning of why people choose real estate. As the property increases in value, your equity grows. This is counted as positive cash flow generated from the assets income rather than other income sources.
Additionally, your investment can create a tax shelter or reduce your tax liability which can save you money you would normally pay in taxes. This can be in the form of depreciation and losses, reducing tax liability against income from other sources, or tax benefits that can be exchanged or transferred.
As an investor you’ll want to understand how depreciation works. For residential real estate you can write off the cost of your investment in an income-producing property over a period of time. This is calculated by dividing the cost of the property (less land value) by 27.5 years.
For example: $300,000 home cost, less $50,000 land value is $250,000. Divide $250,000 by 27.5 years and you will get $9,090.
That is your depreciation amount. Note though, depreciation is added back in when you go to sell. It is all about your intention and goals with the property.
If you are new to investing and this sounds like something you’d be interested in, here are some things you may want to consider:
What do you want to accomplish?
What kind of investment property do you want to buy?
What are your resources? How much can you afford?
What degree of liability are you willing to assume?
What kind of return on investment do you hope to make?
Let’s talk these through! Contact me now for a complimentary consultation. Let’s get your cash flow going as soon as possible.