5 Reasons Investors Buy
Gain More Leverage+
One of the greatest advantages of investing in real estate is your ability to leverage. Leverage allows you to achieve a much higher return on investment than you could without it. Real estate investing allows you to use leverage when you buy, when you operate, and when you use it across multiple tenants. The ability to make a down payment, leverage your capital, and increase your overall return on investment – Using leverage in a real estate investment can have a big effect on your financial statement.
Since cash flow is key, it is important to take into consideration that buying rental property based on “speculation of its value” can be a considerably dangerous tactic. However, appreciation over the long-run is certainly realistic, but you should consider a tax-deferred strategy: 1031 exchange, charitable trust, or an installment sale to lessen your tax liability.
Tax Free Cash Flow+
If you leverage your capital, your cash flow should be tax-free because of depreciation and mortgage interest deductions. In most cases, an investor will not have to pay taxes on their cash flow and can wait for capital gains on the sale of the property in the future.
The Tax Write-Offs Against Your Other Income+
Depending on your income level and classification, for an active investor or real estate professional, there is a good chance your property will not only give you tax-free cash flow, but also an overage of tax deductibles that can use against your other income. This process is something you should discuss with your tax professional before investing to ensure your expectations are realistic.
Increased Tax Deduction Strategies+
Investing in real estate provides investors with the opportunity to convert personal expenses into current business deductions. Real estate is a business; it is a business that may require travel expenses, as well as payments to those who manage your properties. These expenses can be deducted and increase the tax benefits to cash flow, while contributing to the future sale of the property.
It’s important to remember that investing in real estate does not provide you with a “get rich quick” outcome; it is more of a long-term investing process that can help you build a diverse portfolio and gain true wealth.