4 Benefits of Adding Real Estate to Your Investment Portfolio

By
Property Manager with Foundation First Property Group RM423638
https://activerain.com/droplet/56QG

There are 4 key benefits of adding real estate to your investment portfolio. Often times people become so fixated on contributions to their 401k that they fail to realize there are other options. Sure, they hear the ads about investing in gold and silver, and maybe even receive in the mail two "free" tickets to an upcoming real estate buying workshop in the nearest big city, but too many people believe that real estate investing is for the rich elite - the people behind the LLC, INC, LP, et al. 

But I can assure you that real estate investing is available to most anyone who is willing to put forth a little effort. And when I say real estate investing, I'm not talking about a REIT. I'm talking about a tangible, reach-out-and-touch-it, actual structure.

 

Cash Flow

This is the equivalent of the returns you get when investing in the stock market. When the tenant pays the rent, and the landlord pays all the expenses, the money left over is the cash flow. Cash flow coming in is good. Cash flow going out is bad. It is important to do a careful financial analysis of a property BEFORE settlement (and preferably before even looking at the property)!! There is no calculus or trigonometry involved analyzing cash flow, but I would strongly recommend speaking with a real estate agent or property manager for the first few deals. A positive cash flow gives steady, reliable passive income, compared to the earned income from a job.

 

Taxes

Real estate investing comes with a nice benefit called depreciation. It's basically the government saying, "We stink at managing rental houses. Here's an incentive for you to do it instead of us." While you are able to write-off the cost of that new water heater, taxes, and mortgage interest, those all cost you money. Not so with depreciation. And, depending on how active you choose to be in the management of your investment real estate, you might be able to carry over a decent chunk of your "paper losses" to offset some of your earned income.

 

Amortization

The fancy way of saying paying down the mortgage. Who's paying the mortgage down? The tenants! If you buy an investment property right and it produces monthly positive cash flow, your tenants will be reducing the principle of your mortgage every month. This is such an important concept! If you buy a new car and drive for Uber to help make the payments, you yourself are still working to pay that loan down. But with rental real estate, someone else is making the payments for you.

 

Appreciation

This one is last for a reason. It should not be the primary reason for buying a property. The old adage is that you make your money when you buy. Buying an investment and requiring appreciation isn't investing - it's speculating. I think of appreciation as the icing on the cake. As long as you have a buy-and-hold mentality, appreciation will rarely let you down.

 

While real estate investing may not be right for everyone, it definitely deserves consideration. The annual returns in the stock market typically average 7-12%. By combining the 4 benefits of owning investment real estate, returns will commonly run 20-40% or even higher annually. It's no wonder that more and more people are adding investment real estate to their portfolios today.

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Topic:
Real Estate General Information
Location:
Pennsylvania York County Hanover
Tags:
rental
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investment properties
why invest real estate

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Rainmaker
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John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Jeff Wright Those are very good tips for adding investment real estate to portfolio

Jul 20, 2017 01:20 PM #1
Rainer
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Michelle Edwards
Realty One Group Trilogy - San Bernardino, CA
Licensed Realtor® in California and Nevada

Good food for thought, thanks for sharing this.

Jul 20, 2017 04:56 PM #2
Rainmaker
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Kat Palmiotti
Grand Lux Realty, Monroe NY, 914-419-0270, kat@thehousekat.com - Monroe, NY
The House Kat

Welcome to ActiveRain! Investing in properties can definitely be an important part of a financial portfolio.

Jul 21, 2017 03:40 AM #3
Rainmaker
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Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

I like your new logo ! Great job on your first AR post !!!!!!!!!!

Jul 21, 2017 04:40 AM #4
Rainmaker
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Gordon Crawford
Gordon Crawford Home Selling Team - Morristown, NJ
Your Morris County Specialist!

Jeff, great info.  Welcome to ActiveRain.  It's a great resource.

Jul 21, 2017 04:51 AM #5
Rainmaker
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Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Jeff and Welcome to the Rain where we all help each other and learn from each other.

 

Jul 21, 2017 06:24 AM #6
Rainmaker
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Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • Green • GRI • HAFA • PSC Calabasas CA

Welcome to our blogging community! 

Congratulations on your first post.

Jul 22, 2017 08:07 PM #7
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Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Jeff Wright - Welcome to ActiveRain.

This is The Best place to learn, share and build relationships with like-minded professionals.

Jul 22, 2017 10:33 PM #8
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Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

You are right. Investment can be for appreciation - though never depend on it.

Jul 22, 2017 10:34 PM #9
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Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams Fox Cities - Stevens Point, WI
Forestland Experts! 715-204-9671

Thanks Jeff, Real Estate has always been at the top of my investment portfolio.

bob

 

Jul 31, 2017 12:14 PM #10
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Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams Fox Cities - Stevens Point, WI
Forestland Experts! 715-204-9671

Welcome to Active Rain, looking forward to reading many more of your posts, let me know if there is anything that I can do to help as you get started here.
All the best of success to you.
Bob

Jul 31, 2017 12:14 PM #11
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Jeff Wright  welcome to ActiveRain, and congratulations on writing your first blog on this site.

Aug 14, 2017 04:03 PM #12
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Jeff Wright

Property Manager in Hanover, PA
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