Rental Property Investment Benefits

There are many great reasons why rental property investment is a great idea:

• Real estate markets are slow to react to changes in the economy and you are not going to lose 50, 90 or 100% of the value of your investment overnight (both people and banks are really stubborn about reducing asking price!).
  
  I once bought WorldCom stock and "made" lots of money on paper. Of course, when WorldCom went bankrupt, I lost every penny I invested. Lots of investment risk there!



• Rental property investment allows you to use leverage more than any other investment. For 95% of the population using leverage to buy stocks is far too risky. So when you buy $100k worth of stocks you invest $100k. With real estate (outside of your home) you generally can take that same $100k and buy a property worth $500K by putting 20% down and getting a loan for the balance.
  
  Leverage multiplies the gains you experience on your property. If all you gain is appreciation, your 20% down payment will take a 5% property appreciation and turn it into a 25% return. Try getting that from your stock portfolio year in and year out! This is a top reason real estate is the best investment. Further, one little secret is that you can buy with 100% financing of investment property. You cannot calculate a return from that!



• The real estate market is not efficient and so you can purchase property at below market value and create instant equity. The stock market is very efficient so when you buy stocks you get exactly the value you pay for.
  
  Real estate can be purchased below market value because the investment is not as liquid as cash or stocks. People have situations in their lives which force them to take less than the actual value of the property. This makes them motivated sellers. This means you can gain instant equity if you are a patient investor.



• Rental property investment offers tax advantages that are not possible with stock investments. For example, the IRS allows you to depreciate the property (even though it is gaining in value) and offset the income from rental.
  
  If you are an active investor you can establish a real estate business and gain even more tax advantages and offset losses against your ordinary income. Our tax laws favor real estate investment and business investment. The laws give little or no tax advantage to stock investors and employees.



• You can control your real estate investment's value. Think about how much control you had with your investment in Enron or my investment in WorldCom. Not much at all! But with real estate I can do things to my property to increase its value - painting, increasing the rent, adding a carport, etc. See what the best home improvements are.



• You can pull out money from your property without paying taxes! Impossible you think? After you have improved the value of your property, just refinance. Since you haven't sold the property there are no taxes due.



• Your tenants pay for your property! If you buy a property with a positive cash flow and use the "rent to own" strategy your property literally pays for itself. Each month the loan principle decreases adds to your net worth. You can't find a better investment than that!



• Last and best of all, the greatest benefit of rental property investing is the peace of mind and security you have when the world is crashing around you and you have a nice cash flow stream on automatic pilot!

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