Why real estate is an I-D-E-A-L investment
Unlike other investment vehicles, real estate investment provides five (5) financial benefits to a real estate investor.
Why Real Estate is an I-D-E-A-L investment for many people
Income - Purchasing income property provides an investor a relatively predictable return. An investor can perform due diligence on a property to determine that the property will provide "positive cash flow". Positive cash flow is when the rental income exceeds the expenses on a property, including debt service to net and investor a positive return each year.
Depreciation - This is a tax benefit of investing in real estate that is not available with investments such as stocks. It allows an investor to generate a positive cash flow and still show a loss for tax purposes.
Equity Build-up - When a property generates a positive cash flow, the tenants, over time, pay off the mortgage. Eventually, the property can be debt-free. In addition, on an amortizing loan where the owner pays principal each month, more of the payment goes to pay down the loan and less goes to pay interest.
Appreciation - As with other investment vehicles, an investor would hope or expect the value of the property to increase over time.
Leverage - While an investor only needs to put a small portion of the purchase price down on the property, it is possible to finance the majority of the price. While it is possible to put only 20-30 percent (sometimes lower) down on a property, an investor gets to keep 100% of the profits. While the lender is taking the majority of the risk, the borrower gets to keep all of the profit. This is probably the greatest benefit and the key differentiator between real estate and most other investment vehicles.