WHY INVEST IN REAL ESTATE?
There are many great reasons to invest in real estate, but the part that stands out most is "control." Many people feel that investing is "risky," but that's because they don't have control over the asset in which they invest. There is very little control over savings, stocks, bonds and mutual funds. People worry about job security because they lack control over their job. Few employees have any control over the ownership of the company, how much they earn, how much they are taxed or the future of their job. In addition to control, real estate investing offers many other advantages. If a piece of real estate is purchased at the right price, is financed well, is in a good area and is well managed – then some of the advantages of real estate are the following:
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Cash Flow – Checks come in every month.
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Leverage – Bankers will line up to lend you money for investing in property. Ask your banker if he or she will lend you money to buy mutual funds.
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Appreciation – Because the dollar is going down in value, real estate tends to increase in value. Also, as our population increases, demand for real estate increases, which also drives up prices.
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Depreciation – The government offers tax breaks for real estate because it goes down in value. Real estate can go down in value, but it tends not to. In reality, the reason why governments offer depreciation incentives is because real estate investors provide housing.
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Creativity – The value of the property improves through creativity. For example, if you buy a piece of raw land, you can change the zoning. Or if you buy an old house, you can fix it up.
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Amortization – Tenants pay off the debt.
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Tax-Deferred Money – One of the great advantages of real estate is tax-deferred money. There are many ways that a real estate investor can avoid paying tax ever — legally. One way is known as the 1031 tax-deferred exchange. This tax-deferred treatment is not available for people who invest in stocks, bonds and mutual funds.
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Predictability – It takes some time to stabilize a multi-unit property or an apartment complex. You may need to get rid of a few bad tenants, make the cosmetic repairs that good tenants want, and then slowly increase rents. Once a building is stabilized, the checks come in every month like clockwork. That certainly beats the ups and downs of the stock market.
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Expandability – you may want to start out by buying a few single family homes and then expand into multi-unit properties.
– Robert Kiyosaki, Why We Want You To Be Rich
Recommended Reading
- Rich Dad, Poor Dad – Robert Kiyosaki
- Missed Fortune 101 – Douglas R. Andrew
- Ordinary People, Extraordinary Wealth – Ric Edelman
- The Truth About Money – Ric Edelman
- Rich Dad’s Guide To Investing – Robert Kiyosaki
- Why We Want You To Be Rich – by Donald Trump and Robert Kiyosaki
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