A SERIES ABOUT PASSIVE REAL ESTATE INVESTMENT
doing is because using leverage to buy real estate gives you three distinct benefits. It allows you to multiply the number of investment purchases you can make with the same amount of money. Second, you will own more properties earlier than if you saved all the money upfront. Last, leverage can increase your returns within the investment. Tax-saving strategies can be another super sneaky way to enhance what you are doing currently. One big benefit of buying real estate, similar to certain business expenses, is the opportunity to depreciate a portion of the asset yearly. You may be able to reduce income earned by what you pay in mortgage interest and expenses. Tax strategies depend on your current taxable income or tax structure, so please talk to a certified tax professional who understands the benefits of real estate to discuss the best fit for you. Appreciation of the value of the asset is a sneaky way to make inflation work for you rather than against you. When you own and control a real asset, you get to participate in the upside of rising prices. When you have purchased an asset at yesterday's prices with other people's money, you own today's value with yesterday's pricing. The increased value of the asset is one very sneaky and slow way that real estate amplifies your results and affords you greater freedom in the future. Warren Buffet says to buy assets where you can increase prices to keep up with inflation without lowering demand for the product. Rent has that benefit. People will always need a place to live, and rent has historically increased with inflation. To pull all of this information together, let's compare real estate to funding a 401(k) plan. Let's say you decided it's time to fund your retirement plan. You ask your neighbor if they would be willing to invest the $1500 you need every month in your account. How likely are they to agree to that? It will never happen. What if you invested in a property in your neighborhood instead? If somebody you know wants to live near you without buying a house, how willing will they be to pay you $1500 monthly rent? If the house is nice, it fits their needs, and the rent
is equal to its worth, they will likely pay you the rent. In essence, they are, in a super sneaky way, funding your retirement account. Rent allows the asset to pay all the expenses for itself. You get to own the asset's appreciation, capture equity from mortgage paydown, utilize tax-saving strategies, and keep the net cash flow after paying all the expenses with someone else's money. Leverage allows you to buy more real estate with the same amount of cash earlier, increasing your returns. As you can see, understanding investment real estate gives you options to take advantage of more opportunities and create freedom for yourself and your family.
Margo Spilde is a real estate entrepreneur specializing in buy-and- hold, private money, and wealth strategy. She is the best-selling author of Live Your Life of Abundance. Margo is passionate about helping people become the best version of themselves through Love Your Life Coaching and Advisory Group. www.margospilde.com
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