As an investor in rental properties, you are likely well aware of one of the most appealing advantages of investing in real estate– cash flow. Just like a stock paying dividends, a rental property that has been well-vetted can provide a steady income stream. While this cash flow is great and, in truth, tends to outperform the payouts from dividends, it’s not all real estate has on offer. There are a variety of other ways in which real estate creates returns on your investment, and each of these can add even more value to your portfolio.
Throughout the years, many have turned to real estate as an investment again and again for one reason– appreciation. An increase in a property’s value over time is one of the simplest and most reliable ways in which a property can generate ROI. While not bullet-proof (or recession-proof), appreciation does tend to work over time and can be an excellent source of profit.
Consider this, too, appreciation working hand in hand with leverage is even more impressive. If you paid 100k cash for a property and sold it for 110, you made a tidy profit. If you financed it, however, and put ten percent down, after that sale you’ve actually doubled your initial investment. That’s a performant return.
As your tenant pays down your mortgage, you will build more and more equity in your property. You can make use of this equity even before you turn a property over. Taking out an equity loan under favorable conditions can give you the influx you need to invest in even more properties.
This is a big one, and maybe one of the most appealing factors for many in real estate investment. The tax breaks when you invest in real estate are sizable. Deductions, Pass-Through Deductions, Capital Gains, and Depreciation are just a few in the long list of ways in which you can use real estate to put cash back in your pocket. After all, who doesn’t want to go down an entire tax bracket at the end of the year?
Every year, Spartan Invest hosts the Spartan Summit to help educate passive income investors about this particular topic. We know how crucial this information is and that is why our most trusted CPA’s always have a spot on the agenda to bring you answers to your biggest questions during their accounting presentation.
Finally, there’s inflation to consider, as well. If inflation ticks up and everyone else is getting the chills, you can rest assured that rising inflation will lead to rising rents and even more cash in your pocket each month.
All in, real estate offers a multitude of ways to create returns. With the volatility of the stock market and financial crises looming large, real estate just may be the safe haven your money needs to grow continually and reliably.