6 Benefits Of Real Estate Investing!

Interested in Real Estate? You’ll love these 6 Benefits Of Real Estate Investing!

I will break these 6 benefits down using real-life examples I’ve benefited from.

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#1 Equity Capture or “Instant Equity”

Locate a home that needs work, where you can add “Instant Equity” by making repairs, and the total cost comes under the after-repair value.

Example:

Buy a Home with an after-repair value of $130,000, for $90,000, and put $12,000 in repairs

The total investment would be $102,000, once it is 100% fixed and rentable.

Take it to the bank and have them value it at $130,000+

You just made $130,000 – $102,000 =$28,000 of Instant Equity and added to your Net Worth!

Plus, refinance and leave 25% ($32,500) in the deal and pocket $97,500 paid back to YOU to do it all over again.

#2 Cash Flow

Now onto Cash Flow!

This property is rented for $1,200 monthly paid to YOU, but it’s not all net income.

You have expenses;

1. Property Manager $120
2. Mortgage (Taxes/Insurance): $550.44
3. Future (Vacancy, Repairs, Capital Expenditures): $172.50

Total Expenses: $842.94

That’s $1,200 – $842.94= $357.06 of Net Cash Flow!

$357.06 * 12 = $4,284.72 Yearly!

Remember when we refinanced we only left $4,500 of our money in this deal after refinancing $97,500 back into our pockets?

That puts this property generating $4,284.72 Yearly with Only $4,500 Invested

Making this a 95% Return On Investment (ROI) (WoW!!!)

What would an extra $4,284.72 of straight cash flow do for you right now?

#3 Principal Pay-down

Remember that Mortgage?

Well, each month your receive rent, that $550.44 is broken into 3 areas.

Principal $88.09, Interest $335.02, Escrow (Taxes/Insurance) $127.33

Over 12 Months that’s $1,057.08 in Principle Pay-Down, this is essentially creating a savings account of equity for you.

Each year as your paying your loan off, the Interest goes down slightly and you end up paying more toward your Principle which leads into the next area.

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#4 Inflation-Profiting

The Inflation rate in the U.S. is roughly 2%.

You’ll notice over the year taxes, utilities, and misc expenses will slowly go up.

You can combat this, by raising rents slowly – usually 2-10% every few years.

For example, Local rents for 3bd/1bth were $1,200 between 2018-2020.

In 2021 rents are now $1,300, you could raise them to $1,275 to stay competitive vacancy is an issue.

#5 Appreciation

Appreciation is the frosting on the cake!

So, that rental that was purchased in 2018, has DOUBLED in value here in 2021.

It’s now worth roughly $180,000, where it (originally) was bought for $90,000!

That means our $28,000 “Net Worth” increased to now over $90,000, while still collecting cash flow on this rental.

You “Could” head to the bank, refinance from $130,000 to $180,000 and pull ~45/50k of cash out of the deal.

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#6 Tax-Write-Off

We all dread TAXES, but owning real estate offers a ton of deductions and write-offs!

Do you pay any utilities; Electric, Trash, Water, Gas, Sewage – those bills are all able to be written off against your net income.

You also have that mortgage with interest and taxes and insurance that can be written off.

Don’t forget if you need a laptop, software, or tools, to run your business those are all deductible too

You are able to depreciate 3.636% of property value each year for the next 27.5 years!

So if the home purchase was $90,000 (20k is land value) leaving 70k of property value – 3.536% = $2,475.20 in depreciation alone!

We want to pay the least amount of taxes on that $4,284.72 cash flow!

DISCLAIMER
I am not a Financial Advisor, Attorney, or CPA, and no Financial, Legal, or Tax Advice is being provided. State laws and individual circumstances may vary, consult your Financial Adviser, Attorney, or CPA before you make any decisions or take any action that could affect your business, the above information is based on my experience over the last few years.

CONCLUSION

Does this post make you consider Real Estate Investing?

This is 1 Property, after refinancing take that $97,500 and apply that to your second property and repeat it!

Soon you’ll have 5 properties under your name, creating nearly $20,000 of non-taxable income using the tax-write offs

I hope this article has helped you in learning the 6 Benefits of Real Estate Investing!

If you have any questions or suggestions, please feel free to let me know in the comment section below.

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– Investing On The Go