Real Estate Investment Advantages

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Real Estate Investment Advantages

Post  duffyrico on Thu Jan 26, 2012 11:39 pm

A. Cash flow from property - This is the difference between your income and your expenses on that specific piece of property.

B. Appreciation in the value of a property - There are two kinds of appreciation, the “external” and “internal”. “External” appreciation has nothing to do with the actual property itself but comes from economic conditions,. Some people have made good deals by predicting where the next property “hotspot” will be and buying in hopes of quick appreciation – but of course, if you get it wrong, you are in trouble. “Internal” appreciation comes from improvement in the actual property itself and is easier for you to control. You can buy a piece of property in need of repair at its “as is” value, improve it and sell it on at a profit.

C. Leverage – being able to buy a piece of property by borrowing a percentage of its value. No other type of investment offers such a high degree of leverage. It is not unusual for investors to purchase a single family house by obtaining 100 percent financing – i.e. “no money down” real estate investing. This of course is very attractive if you can “flip” the property at a profit, quickly repay the loan and pocket the difference. But of course this can also be extremely risky. If the property doesn’t prove to be a good investment, you are in trouble. Never forget the loan is a loan and has to be repaid – somehow.

D. Amortizing - You have bought the property with other people’s money, but as you repay, your principal is being reduced. That means your equity – your level of ownership of the property - is being increased.

E. Tax advantages - There are several ways in which property ownership can be used for legitimate tax avoidance – though this should not be your first and foremost reason for buying the property, more a side benefit.




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duffyrico

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