Residential real estate offers five major benefits. Most other investments offer only one or two.
1. Cash Flow – The rent provides income, i.e. Wake-up Money. This is your ultimate goal. When your property is free and clear, you have the maximum cash flow and Wake-up Money.
2. Leverage – You can own $150,000 worth of real estate with only 20% -25% cash. Your short term goal is to use leverage to acquire a portfolio of real estate. Your long-term goal is to pay the loans off and own your properties free and clear.
3. Debt Reduction – Real estate is one of the few investments where someone else will make your payments. In essence the tenant makes the payments and reduces your debt.
4. Tax Savings – You are allowed to depreciate the house and write off your expenses in order to reduce your taxes.
5. Appreciation – Over time the value of houses and condominiums have risen. Even though the value of houses and condominiums have risen over time, we believe appreciation is the icing on the cake, not the cake.