Real Estate Investing: Three Ways To Benefit
There are several ways in which people may invest in the market today. A greatly rewarding way to do this is real estate investing. Investing in the real estate market can provide quite a nice source of income. If you want to become a real estate invester you can enjoy great benefits, these become favorable to this investement vehicle.
Financial leverage is an enormous benefit to investing in real estate. Even if you need to take out a bank loan for your real estate investing, you will often find deals with 10% down payments, so your returns are already magnified ten times. Assume you have $10,000 to invest and can get a 10% return on your investment in any type of investment. In the stock market, $10,000 worth of shares will be worth $11,000 a year later. In real estate, your $10,000 investment, combined with a 90% loan, brings you 10% on the full $100,000 investment, so you finish with $110,000.
While your $10,000 has earned only $1,000 in the stock market, it has been doubled in the above-mentioned real estate investment. How? Not only has your own money has been working for you, but your lender’s money has, too. This power of leverage is one of the best reasons to consider real estate investing, but it is not the only reason we will give you to become a real estate investor.
Another incredible reason to begin investing in real estate is the tax benefits. One of the best tax breaks of real estate investing is the REQUIRED depreciation by the IRS on the property. This represents a “paper loss” when in most cases the property (including the land) is actually appreciating. So in essence you pay taxes on a reported profit figure that is significantly lower than your actual earnings – very nice.
There is, perhaps, an even greater tax beneft in the 1031 exchange as defined in section 1031 of Internal Revenue Code. What this essentially allows is for an investor to delay the payment of capital gains taxes after the sale of a property as long as the gains are reinvested in another appropriate property. Here the government basically encourages an investor to stay in the market because of this great incentive.
A final benefit of investing in real estate is flexible sales contracts. While in the stock market, you can invest only cash, you can make creative offers for real estate, exchanging virtually anything for property. This flexibility can produce greater returns and arrangements that benefit everyone involved.
- Scott Roemermann
:: Feb.06.2010 :: Health :: No Comments »
