Ten Advantages to Investing in Real Estate
Ten Advantages to Investing in Real Estate
by Jim Remley
As real estate professionals, we are often asked why real estate is such a good investment as compared to, say, the stock market, or bonds, or perhaps certificates of deposit. Just what makes real estate so special?
Many agents just don't know, so they fumble and ramble and hope the question goes away. But for the savvy agent, this question is an opportunity to open the eyes of our clients to an investment tool that has no match.
Before we begin, I have to say I have noticed a disturbing trend in recent weeks. The news media has begun to slowly turn on the real estate market with stories touting the burst of the so-called real estate bubble. (See Fortune Magazine's August issue)
I say hogwash! The fact is the investments gurus making these predictions have a vested interest in turning people away from real estate - they sell stocks. The same stocks that have over the last three years cost people their life savings, their retirements, their kids' college education and their sense of security. I have yet to see a real estate investment drop in value by 50% within six weeks. Yet how many stocks have done exactly this? So now I'll get down off my soap box and we can take a closer look at the power of real estate investing.
Here are the Ten Advantages to Purchasing Investment Real Estate:
1. This is a tangible asset.
It is something you can feel, touch and see. You can drive by it every day if you want!
2. This is a unique asset.
As the old saying goes, they don't make land anymore. Your real estate investment is one of a kind!
3. Passive Loss Rules.
Your real estate investment can create a passive loss, even when you are making a positive cash flow. Think of it as a paper loss, which can offset ordinary income and lower your taxes!
4. Your investment may appreciate over time.
In one study of recorded real estate history, real estate had gone up on average 5.5% a year for the last 100 years!
5. Your investment may provide a monthly cash flow.
Many investments will provide a monthly income that you can use to fund more investments.
6. Your investment can grow equity.
Every payment you make on a mortgage decreases your principal balance, which means when you sell you will be getting that money back in equity!
7. Your investments when sold may be tax deferred.
If you follow 1031 exchange rules, you can roll your gain into a new investment and defer your tax!
8. Your investment may become tax free!
How? Imagine that you own a rental for several years and then move into the home yourself. As long as you meet the new IRS guidelines for a principal residence, when you sell this home you may be able have a tax- free gain. See
9. The Power of Leverage is a huge advantage with real estate.
By using a relatively small portion of cash you can readily acquire all kinds of investment real estate with leverage - bank or owner financing. This can multiple your return dramatically!
10. You may find a bargain!
Bargain real estate is all around us if we just begin to look! A great new source of REO and bank foreclosure real estate is , and .
GYMBEAUX NOTE: There are other reasons to invest in real estate; here are two:
1. Paying Rental Fees for a college student versus buying a rental home. Think about this sersiously. How much does it cost to house a student for a four year college education? Wouldn’t it make sense to purchase a double, house your student in one side and rent out the other side? Or even have your student rent out and extra bedroom or two in the side he or she is living in. Then in four years, you have the option to continue renting the property or selling it. You can then hire your student son or daughter to manage your rental property and the cost of the salary may also be tax deductible.
2. Secondary Homes. This is an idea whose time has come but very slowly. Every day we see homeowners refinancing their primary home to take cash out. Why not invest in a secondary home in a market that has a good rental draw such as beachfront? Example, in a lot of beachfront communities and other resort areas, people buy homes/condos for secondary homes but also put those homes into managed rental programs where the property is rented out on a short-term basis and is still available for the owner to use when needed. In these situations, the rental income usually is far more than the mortgage payment and upkeep making it a positive cash flow investment. Better still, current IRS regulations permit you to travel to locations where you own real estate and the trip becomes deductible thus saving even more money.
3. College Education. A great many families realize how difficult it is to save enough money to pay for a college education and have invested in rental property to accomplish this objective. Example, you have a child, you purchase a rental home. You rent the home out while your child is growing to college age and then you sell the home that tenants have helped you pay for and put the money towards your child’s education. You have another child, you buy another home.
So as you can easily see, there are numerous reasons to purchase additional real estate. These are but just a few.
Jim Remley is a speaker, author, and consultant. He is also an active Real Estate Broker in Southern Oregon where he owns six real estate offices. Jim won the Rookie Instructor of the Year award in 2001 from Realty-U, the largest network of real estate educators in the nation. Recently he won the 2002 Pacesetter Award, and was nominated for Real Estate Instructor of the Year during the first quarter of 2003. To learn more about Jim please e-mail jim@ or visit .
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