Nine FINANCIAL Reasons to Invest in Real Estate
In his book “ABC’s of Buying Rental Property”, Ken McElroy outlines nine financial reasons to invest in real estate. I have followed Ken for ten years and really enjoy his teachings. He is a rich dad advisor and owner of billions of dollars of cash flowing real estate.
Here are 10 Financial Reasons to Invest in Real Estate (at any age):
1. Real estate has predictable cash flow.
Cashflow is the amount of money that flows in or out of a business over a set period of time. A great real estate investment can yield up to 10% or better cashflow.
2. Real estate appreciates in value (often tax free).
History has proven that real estate (although it has it’s ups and downs) appreciates over time. Rental rates are the same and increase over time. Appreciation in property values and rents means that you, as a real estate investor, have a built-in hedge against inflation. (which we could really use in 2022-2023!!)
3. Real estate can be leveraged.
Leverage is when you use other people’s money to make money. Debt is covered by rents from properties and the interest is tax deductible. You can use other peoples money to gain all the positive ways to make money from real estate. This creates an infinite return for the real estate investor. Leveraging real estate is a lot cheaper than leveraging money to invest in the stock market because the property becomes collateral (security) for the real estate loan.
4. Real estate is tax deductible.
You are only taxed on the profit that is left after paying your expenses, unlike your job, where you are taxed on the entire amount of money you make. You can deduct the cost of maintenance, repairs, mortgage interest, taxes and depreciation. Real estate investors pay little or no taxes as they build wealth.
5. Real estate is depreciable.
Government lets you depreciate your property, which means you get to deduct a portion of it’s value and pay less taxes each year. This means as an investor, you get to take a tax deduction while your property increases in value.
6. Real estate can be refinanced to pocket the profit.
When you refinance a property, you can pay yourself the equity earned to take as a profit, pay back investors or use this to purchase another property as a downpayment. This is a strategy serious real estate investors use routinely to get to owning a property with none of their own money, thus creating an infinite return.
7. Real estate profits are taxed at a lower tax rate.
Your profits are taxed as a capital gain, not as earned income. This means you will usually pay less taxes, which is a huge benefit to you. Real Estate investors earn much of their income through investments that are taxed as capital gains, not income. This is a wealth building tool of the rich.
8. Real estate is improvable (sweat equity).
You can build equity (wealth) by fixing up the property. You aren’t taxed for your work on the property.
9. Real estate offers asset protection.
Real estate can be insured that is paid for by tenants and is tax deductible. Real estate can be put into a Limited Liability Company, which allows you to protect your personal wealth, thus protecting your assets.
In short, the risks associated with investing in real estate are far less than those you take with stocks and many other investment options.
Kind Regards,
John Heeney
Glenroe Lending
“We build LEGACY to create TRANQUILITY”
john@glenroelending.ca
519 808 7370
