Is Real Estate the Right Investment for Me?
by Frank Nicholson
Also be sure to read the other investing articles.
Now on to whether real estate is right for you …
Why real estate?
Income-producing real estate is a stable investment that is not subject to the volatility of the stock market. Price fluctuations typically take place over years, not hours. Income-producing properties pay for themselves while you build equity and, if properly structured, may even give you a monthly income. This coupled with the fact that owning income-producing real estate has some tax advantages that may not be available for other investments makes real estate investing quite attractive.
How does real estate maximize my returns?
When you invest in real estate, you use other peoples’ money (OPM) in the form of a mortgage. With a 20% down payment, you are using 20% of your own money and 80% of OPM, yet you control 100% of the asset and receive 100% of the equity growth. Your tenants pay back the loan (OPM) for you and may even put some income into your pocket each month.
What are some of the tax advantages?
If you hold income-producing properties for a year or more, profits from the sale are taxed as capital gains rather than regular income. You can deduct depreciation on investment properties as an expense against the income of the property each year. The depreciation taken decreases the basis and must be considered as gain when the property is sold, but with a properly executed 1031 exchange, you can roll the basis over into the new property with no tax liability until the new property is sold. This can be repeated indefinitely.
Are there any risks involved?
As with any investment, there is always a certain amount of risk. Real estate should never be your only investment. Diversification is the best way to minimize risks. Consult with your financial advisor to determine how much of your portfolio should be in real estate.
How do I get started?
Contact us for a free, confidential, no-obligation consultation. We will discuss your wants and needs to determine if income-producing real estate is right for you. We will then set goals and objectives and implement your Wealth Building Plan.
