Stress Free Finance

There are many ways people can invest in today’s investment markets. One of the most rewarding ways is by beginning real estate investing. Investing in real estate can prove to be a very good source of income. If you decide to begin investing in real estate you will enjoy some amazing benefits which are favorable to this investment vehicle.

First of all, real estate investing has the enormous benefit of financial leverage. Even if you get loans for real estate investing from a bank you can often get into a deal with a 10% down payment which means your returns are instantly magnified 10 times. So let’s assume you have $10,000 to invest and you get 10% return on your investment regardless of the vehicle. If you put it into the stock market you will buy $10,000 worth of shares and after 12 months your investment is worth $11,000. If you put that same money into real estate with a 90% loan you earn 10% on the full $100,000 investment and finish with $110,000.

Compared to stock investing, real estate investing gives ten times more returns. Mind boggling, isn’t it? Before you start to wonder, “How on earth is that possible?”, let’s answer it for you. When you take a loan for buying a property, it works towards maximizing your returns by the concept of “leverage”. Though there are several other reasons for real estate investing, leverage does make real estate investing lucrative to potential investors.

Tax breaks on account of depreciation of property is an important reason for getting started in real estate investing, at the earliest. While in reality the value of property is appreciating in its value, due to increase in the value of land, you get to claim a tax deduction on some notional tax loss, or in other words your taxable income is significantly lower than your real income. Great!

The 1031 exchange defined in section 1031 of the Internal Revenue Code of United States figures on top of the list of tax benefits available to US citizens. Under this, the people selling their property don’t need to pay capital gains tax if they choose to reinvest the proceeds of that deal into another real estate investment.

There is a unique advantage of beginning real estate investing in the fact that, unlike in stock market, you do not need to have standard offers and contracts. You can virtually bargain anything and everything for your property, resulting in some stupendous gains for everyone involved.

Real estate is one of the most lucrative investments these days. So how does real estate investing work? For those considering beginning real estate investing, there are many benefits. Leveraging your finance means you can earn up to tens times the profit of stock market investment because your lender’s money has been working for you as well. Tax benefits are another reason to become a real estate investor. Required depreciation allowed by the IRS bring tax liability down every year, while the value of the property climbs. Finally, there is great flexibility in real estate sale contracts.

- David Williams