Real Estate Investing Instead Of Playing The Stock Market
There are several ways in which people may invest in the market today. A greatly rewarding way to do this is real estate investing. Investing in the real estate market can provide quite a nice source of income. If you want to become a real estate invester you can enjoy great benefits, these become favorable to this investement vehicle.
First, investing in real estate has an enormous benefit of leveraging financially. Even borrowing money for real estate investing from a bank you may often get a deal with a down payment of 10%, this means your returns may be instantly increased tenfold. Assuming you have $10,000 for investing and you get a 10% return on that investment regardless of the investment vehicle. Putting this in the stock market will buy you $10,000 in shares and 12 months later your investment is worth $11,000. Putting the same money in real estate with a 90% loan you end up earning 10% on the entire $100,000 investment and end up with $110,000.
So your $10,000 has been doubled in the real estate investment above whereas it only produced an extra $1,000 in the stock market. Why? Because your lender's money has been working for you too. This is the power of leverage and is one of the biggest advantages of real estate investing. And yet there are even more reasons to become a real estate investor as you will see.
Another good reason for investing in real estate comes from the tax benefits. One of the greatest tax breaks associated with real estate investing is the REQUIRED depreciation of the property by the IRS. This is representating a 'paper loss', but in most cases the value of the property (including land) is increasing. In essence you end up paying taxes on a reported figure of profit that is actually lower than you real earnings, which is very nice.
Perhaps an even better tax benefit is the 1031 exchange as defined by section 1031 of the Internal Revenue Code. Essentially this allows investors to delay paying any capital gains taxes when a property is sold as long as the proceeds are reinvested in an appropriate property. The government is basically encouraging investors to stay in the market with this fantastic incentive.
A final benefit of investing in real estate is flexible sales contracts. While in the stock market, you can invest only cash, you can make creative offers for real estate, exchanging virtually anything for property. This flexibility can produce greater returns and arrangements that benefit everyone involved.
- Scott Roemermann
