Our current economic state is one of great uncertainty. While it’s not easy to predict what the economy will do next, investors must make decisions with the information they have available. For some, this may mean selling stocks or divesting into other assets classes.
Having your investments generate the optimum cash flow can provide benefits not just in the present, but for years to come. Investing in real estate is a great way to increase your cash flow, de-risk your investment portfolio, and pay lower taxes.
Cash Flow and Real Estate Investment
The best cash flow investments are very important for real estate investors, to add to their portfolio. This is the money that flows from your investment property each month into your bank account. It is key to find investment properties that provide a consistent cash flow each month so that you can rely on them as a source of passive income. There are many different types of real estate assets that provide consistent cash flow to investors, such as residential rental properties, commercial rental properties, and residential/commercial mortgages or notes. When considering which real estate investments make sense for your financial situation, it’s important to look at the cash flow potential of each investment you’re evaluating. You want to ensure that the investment generates enough surplus cash flow after accounting for your monthly mortgage payment, repairs & maintenance, other expenses related to owning that property.
Increase in Investment Value & Equity
In addition to receiving a steady consistent cashflow from your investment property, there is potential for the value of the property itself to increase over time. Depending on the type of property you choose to invest in, this increased value can help you create a significant amount of wealth over time through a process called “asset appreciation.” The value of these assets will increase as time goes on, making your investment even more valuable over time. If you have taken debt leverage to acquire your investment property then each month as you pay down your mortgage, your equity in the asset increases. You could also use the equity in the property to finance other investments or fund your retirement. This helps you build a significant amount of wealth over time.
Tax Benefits of Real Estate Investment
The tax benefits of real estate investment can help you further maximize your returns on these investments. When you invest in real estate, you can write off many expenses related to owning and maintaining the property. This can help you save money in taxes each year, which can be reinvested into your portfolio and create even more wealth over time. Several tax benefits apply to real estate investors, including:
Depreciation – If you invest in residential or commercial investment properties, you can deduct the depreciation amount from your taxes each year. This amount is based on the age of the property and the expected future value of the property. You could also claim bonus depreciation in commercial properties.
Capital Gains Tax – If you sell a rental property or other real estate investment, you are taxed at a lower rate than if you were to sell other investments such as stocks, bonds, and mutual funds. You could also do a 1031 Exchange to defer capital gains on commercial real estate.
Benefit from Real Estate Coinciding with Economic Downturn
While there are many benefits of investing in real estate during an economic upturn, this often is also when the market is very competitive for real estate investors. Many people have money to invest in real estate and want to buy properties. This can make it difficult for investors to find the right deal and purchase a property. On the other hand, investing in real estate during an economic downturn can be advantageous. This is because fewer people have the capital and resources to invest in real estate. This can make it easier for you to find the right properties for your portfolio and get a good deal on the property. Also, price fluctuations and market volatility in real estate is much less than what you would find in the stock market.
“We simply attempt to be fearful when others are greedy, and to be greedy only when others are fearful.” – Warren Buffet
Increase Your Cash Flow
Investing in real estate is a great way to increase your cash flow, especially if you choose rental properties with high cash flow. Residential and commercial rental properties are some of the best real estate investments that generate consistent cash flow. This can help you significantly increase your cash flow each month compared to putting money stocks, bonds, treasuries, savings accounts.
Real estate is a diverse asset class because there are many types of properties to invest in. You could choose a specific type of property that you think will benefit your situation and match your risk tolerance level. Now, it’s even more simple and secure to invest in real estate with a relatively smaller amount of capital. Please Call (866) 755-6677 for more information.
Disclaimer: This is in no way an investment advice or solicitation. Please consult your CPA or an investment professional before making any investment decisions.