Investing in real estate is the ultimate return on your money. Nothing else provides the same kind of dollar for dollar returns and has the same kinds of advantages as buying real estate. Let me ask you this, if you had one million to invest, would it be better to invest in real estate or Microsoft stock? If you choose real estate, then you choose the correct answer. Here's why. Even if your real estate investment, appreciates at half the rate as the stock - you would still come out way ahead of the game. This is because a piece of real estate can allow you to leverage against it, you can receive various tax discounts or advantages and a investment piece of real estate can produce residual income or cash flow.
This concept runs pretty much contrary to mainstream thinking by most people. As consumers, the media constantly bombards us with information on why it is critical to invest in stocks, bonds, and mutual funds. But as with most people, who keep their money in various banking institutions, you are beginning to see your dollar disappear right on paper by banks, before your very eyes. Let's take a look at these ten (10) advantages to real estate investing.
REASON #1 - Cash Flow
Always purchase property that can cash flow. It may take time to find them, but it is well worth the effort. The simplest definition of positive cash flow is that you collect more revenue, usually in the form of rent, than it takes to pay for and operate the property. A big advantage of real estate over other investments is that it can produce cash flow on a monthly basis. The cash generated by a real estate investment will always be a much larger percentage cash on cash return than any other investment. The reason for this is the leverage, something we'll go into deeper later.
The beauty of cash flowing real estate property is that it can help you become financially free. Here is an exercise that I like to do. Take out a pen and a paper and write down your net monthly income after taxes and social security. Now write down every expense that you have in a given month. It might look something like this (mortgage, insurance, car payment, gas, groceries, utilities, clothing, entertainment) If you take your hand and cover up the income portion of your statement, then this is what your retirement will look like. A whole bunch of expenses with no income to offset them. To turn this process around, you have to start investing now.
At the end of every month, if you have discretionary income - what do you do with that. If you are like most people, they will purchase items that depreciate. This in turn does not help you become financially independent. If you were to take this same discretionary income (saved for one year) and use this to place as a down payment on an income producing piece of real estate that cash flows - you have just boosted your monthly income. If you soon buy enough properties that cash flow, soon your expenses will be covered by your assets alone. Each and every month, cash flow from your investments will then kick in. If you had to stop working, you would have the peace of mind now, that your investments earn enough to produce or cover your cost of living