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Passive Income
The goal (should you want to retire one day or make money when you sleep and still work) is to have a stream of income which you are not clocking in on your 9-5 or business for. Real estate is the easiest money I have made by far in life, from working jobs to running multiple companies. Putting your money to work to grow and make more money is the ultimate wealth building tool. Your earned income is a tool that should be put to work to generate passive income. Real estate is the greatest tool for that – the longer you hold an asset the more money it makes you without spending 40 hours a week on it.
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Stood the Test of Time
Real estate has stood the test of time. It has always been around in America, and always will be. Great properties and great locations have a demand for Real estate. With population always growing here, what do we always need more of? Real estate. Rents and housing cost have always appreciated. There will be a need for more, and the value will keep increasing.
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Tax Write offs
Who doesn’t love sticking it to the IRS. It is your number one expense to pay in life. What else do you spend 20,30 or 55+ % on (if you live in ultra blue states like CA and NY) in life? Nothing. Taxes are the biggest expense and – let’s be honest – it’s a complete rip off. Who wants to give their money to the government who squanders it and keeps asking for more. The tax code was written SO ADVANTAGEOUSLY for real estate investors. Why? Because of #2. The narrow supply is in huge demand, and we are incentivized to supply housing in America. What an awesome opportunity! Investing in real estate like multifamily housing solves a problem, makes money, and you get tax deductions. Big ones too like these: depreciation, the cost of your purchase price, deducted over time every single year. If you sell a property after owning it for 1 year, you get taxed on capital gains, not earned income. If you want to delay your taxes, you can sell a property and roll the proceeds into another one using a 1031 exchange. Improve the property, and you get to depreciate it over time. Interest on your debt? 100% deductible. We love making money, and we love legally not paying taxes just as much. Most of the tax code was written to not pay taxes – remember that. Typically, properties that we buy show a paper loss on tax returns the first few years while you still are making money. It’s a wonderful thing. Get an accountant who knows the tax code and wants to help you pay as little or no taxes at all.
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Appreciation
This benefit ties into the rest of them. Over time, real estate appreciates. What that means is… it goes up in value. What a time to be alive owning real estate! Since 2020, property values have skyrocketed due to inflation. Inflation is an amazing benefit to your real estate. It appreciates your property investment aggressively. You could have had zero rent increases in that time, and the equity in your property went up 50% in the past few years. One reason we like using debt is you turn $1 into $3 using leverage, but you get 100% of the upside. Including 100% of the appreciation. Here’s an example. You put down $1,000,000 to buy a $3,000,000 piece of real estate, and 4 years later its worth $4.5M. You get 100% of the $1.5M in appreciation of the equity you own in that property. The debt or lender doesn’t get that – you do. Another reason I love multifamily, is that you can force appreciation. Commercial multifamily (5+ units) is valued based off the income it produces. Lowered expenses or increased income = forced appreciation. You don’t even need time. You can take over a property that is low on rents, raise them to market, or clean up the expenses and drastically increase the value overnight, or as the leases turn over. You cannot do that with the home you own, which is based off the price your neighbors sell theirs for.
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Cashflow $$$
The holy grail, the Moby Dick, the best part of real estate investing. Cashflow. Now, cashflow can be passive income or earned income… But here we are talking about real estate cashflow. Money leveraged with debt, turns into rents received with a real estate investment minus expenses = CASHFLOW. All the money left over each year or month – if you invest with Lease Capital – is cashflow. Who doesn’t like looking at their bank account and seeing little monthly drips of cash from an investment they made? You want to grow the cashflow. Take your earned income, invest it in real estate, and receive cashflow. It is very simple – don’t over complicate. One of my first real estate investing goals was to grow the cashflow so big that it can pay me more than I can possibly earn by working my butt off. This takes time but can be done. Take your earned income, invest it, and turn it into cashflow – the outcome of putting your money to work with good investments. You can use this to retire, spend on whatever, or give to whoever you want. We saved the best for last. Cashflow is the best reason to buy real estate – cashflow generating, income producing real estate.
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