It’s a fact, everyone needs a place to live.

Although houses come in many sizes, and shapes, and areas of the world, we all want to have a nice and safe place to call home. The highly influential American psychologist Henry Maslow’s hierarchy of needs defines this need: Food, water, and shelter are literally the first and most basic needs for everyone in their life.

Some people are able to purchase their own home to live in and stay there forever. Others like to buy a house every few years, and make some updates, make a few bucks, and do it again. Or find a house that’s a little bigger after making more money, or starting a family.

Others like to rent a home or apartment. They may not have the money to put down on a house, want to have the flexibility to move to different areas of the country, or don’t want to deal with the maintenance or upkeep on that property.

With people who are renting properties, comes people and businesses who own those properties and rent them out.  This is the magic sauce.

Real estate is a massively powerful tool to build wealth, create passive income, and change not only your financial picture but that of your family and future generations.

There are many great reasons to own real estate beyond just owning your own home. Certainly, investing in real estate is not for everyone. There is a level of risk in real estate, just like every other investment. But if you are interested to learn, do your homework, and take the leap into real estate. It can truly transform and change your life forever. Let’s dig into the reasons why real estate is such a great investment.

Appreciation:

In 1940, the average median house value was only $2,938. In 1960, $11,900. And then in 1980, $47,200. And in 2000 the average house was $119,600. WOW! Imagine having bought three properties in 1940 at the age of 25, and held them until 1980 at the age of 65. You would have made nearly $150,000 just on selling the properties. This wouldn’t have included any rental income or tax benefits.

Different areas of the country have different levels of appreciation. For instance, areas like California and Florida have seen higher appreciation than homes in the Midwest. Those areas typically are harder hit with value swings during economic downturns, specifically in the real estate market.

Markets such as the Midwest don’t typically appreciate as fast, but historically have been more steady during these market cycles.  

No matter what, the value of real estate over time has gone up. If you buy it, and hold it, the chances of that property being worth more than you bought it for are very good.

Tax Benefits:

Because you are owning real estate, you have an incredible benefit with your taxes. You can write off the costs of maintenance, and insurance on your property. You can also depreciate the property and write off portions of that property against your income. Of course, reach out to your attorney and tax professional to best utilize this incredible benefit. You could literally save thousands of dollars from this alone.

You can also own the properties in an LLC, or other types of business structures. This allows you to have additional control on where the money goes, how much money you are able to make, what you write off, and the safety and separation of the real estate from your personal name or other businesses. Make sure you work with someone you trust and is a professional when setting up your LLC or business structure.

Cash Flow:

Depending on the area or type of property you invest in, another great benefit is cash flow from real estate. Basically what it means is, take the rent minus the cost of the mortgage, management, and any maintenance expenses. Whatever is left is the rental income from that property.

As you grow your portfolio, you are able to first cover the cost of your car payment or groceries. Then the cost of your own mortgage, and many people have been able to make as much or more than their entire monthly household expenses and beyond.  

Principal Pay Down:

You bought the property initially for say, $100,000. You put 20% down on that property, leaving a balance of $80,000 remaining. Overtime, having a tenant in the property paying rent means the balance on the mortgage is slowly being paid down.  

From here, you have a few different choices. You can continue to pay that property completely off and have a paid off asset. You can refinance that property, or a group of properties, and take out the refinanced amount tax free! Or, you can take a group of properties with equity in them and use what’s called a 1031 exchange. The properties are sold, and the funds made from the sale are then used to purchase a new property or properties … tax free on the profit! Incredible way to reinvest the money.

Final Thoughts:

Real estate is an incredible way to not only have control where you money is invested, but truly transform your life and build your wealth.  Make sure to always do your homework. Understand what kind of investment you are buying. Know who you are working with, in the title companies, the real estate agents, investors, turnkey companies, and contractors.

Learn and grow through great podcasts, masterminds, local groups, mentors, blogs, and great books. Everything you need to know and learn is out there already. People have already done what you want to do.

Make a plan, lay it out, save your money, and invest in real estate! It will change your life.