Why I believe in using real estate to gain financial independence.
1. Passive appreciation. Historically, housing prices go up. There have only been a few exceptions to this case (such as when the housing market crashed in ‘08), but with time, the price always comes back.
2. Forced appreciation. Most people look to buy homes for themselves and want something move-in ready. But if you’re capable of renovating/rehabbing a home, you can invest money into a house and get a great return on your investment when you go to either sell it or refinance it (increasing your equity or putting more cash in your pocket).
3. Loan pay down. Where else can you buy a $100,000 property for $20,000 and have someone pay the balance for you? That’s what happens when you get a loan from the bank and the tenants pay off the loan for you. And that’s not even getting into more advanced strategies like the BRRRR method (where you buy a fixer upper, renovate it, rent it out for top dollar, refinance it – pulling out all of the money you had in the deal, and repeat the process). In theory, you could just keep recycling the same $20,000 to build your rental property portfolio.
4. Tax advantages. One of the biggest real estate tax benefits available for investors is in the form of deductions. These tax write-offs, which are generally geared towards rental properties, will include costs associated with mortgage interest, property tax, operating expenses, depreciation, and repairs.
5. Diversify your portfolio. Why keep all of your money invested in the stock market – something which you have no control over? I invest in the stock market, and I think it is important that you do too, but why keep all of your eggs in one basket? Even by investing in different sectors (energy, technology, medical, etc), different-sized funds (small cap, large cap), investing in domestic or foreign companies, etc., you still have everything in stocks. In addition being investing in index funds/mutual funds, I would want to truly diversify my total portfolio by buying properties at a great price and having them provide consistent monthly cash flow.