Why Invest in Real Estate?
The stock market, the bond market and savings accounts simply cannot provide the return that one can make in real estate. Why? Because this is the only investment set up where you can get your initial capital back…and create wealth. Here are several reasons that Real Estate, in my opinion is the best investment one can make:
- Real Estate in our market appreciates!! We don’t live in California, where they need 50 year amortizations on their loans to afford the housing…we don’t live in New York, where it costs $750,000 for a tiny condo. We live in Suburban Chicago where the real estate is actually very affordable all the while it appreciates!! We are not like parts of the country (Denver or Arizona from what I have read in many real estate books and heard via horror story) where values may double in a couple of years…then come crashing back.
- You are using borrowed money to buy an appreciating asset. This appreciating asset is being paid for by a renter…therefore you are getting money from a bank in the form of a loan and someone else is paying it back for you…all the while you are taking advantage of appreciation.
- Tax benefits. Real Estate can be depreciated on paper…consult your CPA!! This is a huge reason why I got into real estate. You can also sell real estate without being taxed if you do a 1031 tax exchange…consult your CPA!! I am not a CPA nor do I claim to know tax law…consult your CPA on the tax benefits of real estate.
- You don’t just generate income…you create wealth. Through equity, principal reduction and appreciation you will put together a huge stockpile of wealth. When I first started buying real estate my goal was to become a custom home builder. Now, I would never build homes…the reason…because you have to keep building homes to make money. With rental real estate that you hold, you will have a portfolio or real estate that was purchased with the bank’s money, is appreciating in your name and is being paid for by someone else!! You will have sustained income.
- My Real Estate has very little risk. The real estate that I sell has very little risk…homes priced under $175,000 for example…move at an extremely fast pace compared to higher price levels. Why? Because with modern day lending nearly everyone with a pulse and a pen can get approved for a loan. I jest, but in all seriousness, first time homebuyers and other investors look at this price range favorably.