Updated: Feb 14, 2021
It's no secret that real estate is a staple of many wealthy people's portfolios. Even in 2021, it is considered one of the fasted ways to grow wealth, especially generational wealth.
Consider this story. My wife's parents bought a modest home in Encino, CA 6 years ago for approximately $560k, and now its value has appreciated to roughly 1 million, which is almost double! What other investment vehicle allows an average income earner to generate this kind of passive income/profit from one investment in just 5-10 years?
Real estate is a limited commodity that has a track record of generating lucrative returns over time. One of the most significant advantages to owning real estate is that, for the most part, its resilient to economic recessions. Even after the Housing Crash of 2008, real estate remains one of the smart investments one can make.
Every dollar you invest in real estate is continuously working for you in multiple ways. Here are a few ways below.
Amazing Tax Benefits
One of the primary reasons people invest in real estate is that it comes with lucrative tax benefits. Specifically, as a homeowner, you can deduct the mortgage interest you pay annually and your taxes from your personal federal income taxes. Additionally, if your property is categorized as an investment property, this opens up a world of additional tax benefits. Specifically, as an investor, you can deduct depreciation of your property, which is an amazing “paper loss” and deduction on your personal income taxes.
Another major benefit of owning real estate is that you are building equity unto your property every time you make your monthly mortgage payment. Equity is defined as the difference in your home value and the amount of money you owe your mortgage lender. With each payment, you build more equity into your home and come closer to owning your property.
Also, keep in mind, as you build more equity into your property, you can leverage this equity to purchase additional properties by doing a cash-out refinance or taking out a Home Equity Line of Credit (HELOC).
Finally, one of the biggest reasons real estate is a good investment for the average income earner is appreciation. As I previously mentioned, my wife’s parents have been able to just sit back and watch as their property value has almost doubled in only six years. In general, property value tends to increase over time, especially in hot and emerging markets.
If you’re ready to start investing in real estate or need advice on which markets to invest in, contact me today.
I am a real estate agent located in Los Angeles. I specialize in finding clients properties that will appreciate in value within the next 5-10 years. When it comes time to sell your home, I leave no money on the table when negotiating the best price for your property. If this sounds like something you are interested in, contact me today to discuss your options.