A lot of our clients have been reaching out about investing in real estate. I don’t know that I would do it solely based on what is going on in the stock market, but I do think that it’s always a good time to invest in real estate. There are more ways to make money investing in real estate than most people think about. Typically, when people discuss investing in real estate, they’re first thinking about making it through cash flow—collecting rent, paying expenses, and keeping the difference.
The second thing they talk about is appreciation. This is the theory that, over time, your property will increase in value because that’s traditionally what has always happened.
The third is debt reduction. This happens when the tenant pays down your mortgage over time. Your debt goes down, your appreciation goes up, and your net worth goes up.
The least talked about financial benefits of investing in real estate are the tax benefits. The income, or cash flow, is not taxed at the same rate as your job’s income is. Because it’s passive and not active, it’s taxed differently. Another tax benefit is the ability to write off capital gains. If your home was stock and you were to go and sell it, you’d pay taxes on all of the money you take out. In real estate, you can use a 1031 exchange to roll your money into another property and avoid paying those taxes.
Finally, deprecation is one of the most under-uitilzed tax benefits. Parts of the property that you buy can be depreciated on different schedules, reducing both your income and taxes.
If you have any questions at all or are thinking about investing in real estate, we’d love to hear from you. Give us a call or send us an email today. We look forward to hearing from you soon.