Buying and holding real estate can be a great investment if done right. It can propel you toward financial freedom. Having rental properties is not for the faint of heart and it’s not a simple get rich scheme. It’s a slow and steady way to build wealth and generate monthly cash flow.
1) Cash Flow
The returns generated from rental properties can be significantly higher than other investment vehicles including stocks, bonds, etc. If purchased properly, you can see a substantial amount of extra cash flow each month (even after deducting expenses such as vacancy and repairs).
Real estate by nature is an appreciating asset. Most times, appreciation is there and having the ability to tap in to the equity via HELOCs or equity loans can be a great strategy to leverage that money and buy additional investments.
3) Principle pay down
Assuming your properties are financed, your tenants are paying down your principal balance. What other investments allow you to get other people to pay off the leveraged loans you are using to buy investments?
If you read books on real estate investing you will see how some of the richest people in the world built their wealth by leveraging other people’s money (banks, private money, etc..) to buy income producing assets. Having the ability to purchase rental properties with other people’s money (OPM) gives you the ability to grow substantially and provide higher returns to your COC (Cash on Cash) returns.
5) Tax Benefits
There are many tax advantages to owning real estate including but not limited to: depreciation on each property you own, mortgage interest, repair expenses, travel expenses (mileage to and from your rentals), home office, insurance premiums, and legal and professional services (accountants, property mgmt., etc.).
6) Retire Early
Having rental properties is a means to financial freedom. It’s one of the best ways to build passive income and retire early if you so choose. You can have an endless flow of monthly income all while your assets appreciate.
It’s not an easy strategy by any means. There are many issues that can and do arise…evictions, flooding, maintenance. But, if diligent and persistent, it can be worth it! Give me a call if you’d like to chat real estate investments!
Content provided by Cash Flow Diaries and adapted by Ace United, LLC.