Why investment real estate? Now that is a great questions.
Isn't that plan just full of tenants, toilets, taxes, late night phone calls and dealing with other people's problems? Real estate can give some to all of those elements, but they're not all bad. Real estate investing is like any other business or investment. There is the right way to do it, than there is the way everyone else does it or tells you to.
I do realize that I fall into the category of how "everyone else does it or tells you to ". I own rental real estate, I consult numerous people on how to buy sell, run and tent real estate. Does that make me an export, perhaps? Does that make me perfect or my word gospel? No! And anyone saying that is after you cash. Smile, nod and run. Because when you are dealing with people there is no 1 way, which is why I strongly encourage you to work with a Realtor and or a mentoring group.
Real estate investing is unlike other investments for many reasons 1) housing is essential to life and 2) the amount of direct control you have over the investment 3) Tax benefits and there are lots more.
With binds, stocks, silver and gold, what control do you have other than to buy more or sell? I ask to make a point, but also to learn. With the rental property I manage, I have control over the improvements, capital improvements. Which tenant moves in and maintains the investment. I have the ability to meet or beat. I also have the option to match market rates or to match competition. The big take away is I decide, and if I'm not deciding I have direct access to those who do. I hold them accountable and according to the way things are set up, the decision maker can be removed if they don't perform as expected, to our liking or if they no longer have the property and its investor’s best interest at heart. To me that is control of an investment. Buy hey, what could I know I'm just, a real estate professional.
I won't rattle on about reason 1) housing being essential. To me that is self explanatory. If not a single section of a blog post can't clear that up.
Other than control, real estate as an invest offers up many tax benefits. Within the real estate investment the difference between bills and rent equals cash flow. Or if that phrase is scary to you, call it a dividend. If this was a standard type of investment you would have to pay tax on that income. I mean it is money that came in, right? If the IRS wants you to pay on prizes won at a radio station why wouldn't they want to tax that money? Well using the physical hard asset of the real estate you are able to depreciation and in essence write off that income. They do want to tax you on it. But within the complex labyrinth of federal tax law, there are benefits and loops holes for landowners.
Why is that you ask? Many people in congress are landowners themselves. Since they right that laws that the whole world sings, those laws will be in the favor. Also putting those benefits in there make it so middle class people can invest like the rich. My wife is teacher and I work 2 jobs. We own rental real estate. But if we couldn't take those tax advantages, then I’m not sure if or where our tenant would be. Not saying our rent house is a palace, but the neighbors that walked it said we fixed it up nice.
There are tenant, toilet, taxes and all the negatives you hear about. There are also a lot of positives to real estate investing. Especially if you can connect with a mentor, Realtor or group with great ideas you can steal from. Depending on how you buy and the region you live in. You can also achieve great gains on the cash invested. I have sold real estate investment properties where my clients have come out of pocket no money and that include rehab. Other times they have received 100 % return on their investment with one year between cash flow and unrealized equity.
Yes the real estate market does correct itself. I know investors who bought at the peak, and now they’re current market equity is lower than hoped. They still have cash flow coming in and home prices are on the rice again. When we bought the market was near the bottom. Now it’s on its way back up and prices are rising, but they’re not a peak cost yet.
There is more up front work than buying a bond. However the benefits can last you and your kids a lifetime.
Joe Nickels, Realtor
Lifestyles Realty, INC
These Robert Kiyosaki books are a great start
Rich Dad's CASHFLOW Quadrant: Rich Dad's Guide to Financial Freedom
Rich Dad's Guide to Investing
Rich Dad's Conspiracy of the Rich: The 8 New Rules of Money