Why should I Invest in Real Estate now?

Why the Top Investors Put Their Money into Real Estate? These are the 4 Pillars of Real Estate Investing and why real estate is such a great place to put your money.

#1. Hedge Against Inflation

What happens is when you purchase a home, an investment property, you lock in your mortgage rate, it doesn’t go up and it doesn’t go down, but rents will rise over time. And as the dollar inflates, you’re actually paying down that mortgage with inflated dollars. As your income rises, you have more money and you’re paying down that mortgage. I’m sure if you’ve ever rented, or if you own a home currently as a primary residence, if you bought that home 5 years ago or 10 years ago, that rent or mortgage seems cheap today by comparison of today’s rents and mortgage rates. 

Let’s say you locked in a rate, a mortgage at $5,000 today, in 10 years you might look back on that $5,000 and go, “Wow! Can you believe I’m only paying $5,000 in mortgage?” That same house would be a $10,000 mortgage. You had yourself against inflation as the dollar value falls. Your mortgage stays the same and your rents are rising and you can pay that debt back with cheaper dollars. That’s the number one way.

#2. Appreciation

Appreciation is passive money that you’re earning over time as the value of your property rises in value. This is you sitting back and doing nothing other than maintaining the property and it increases in value. Now, of course, real estate goes up and it goes down and sometimes it can go down a lot.

Sometimes it can go up a lot, but over time over the long-term horizon, your home will appreciate in value. It’s simple supply and demand. Real estate is a hot supply in general, around the country. And so over time it will appreciate in value. You’re going to be earning money via appreciation that you really don’t have to work for at all.

#3. Equity Pay Down by Tenant

When you purchase a property and you lock in your mortgage, normally when you buy a home, you’re paying that down yourself. Over time, you have a home with all your equity built in because you paid all that money into it. But with an investment property, now, someone else is paying down that mortgage for you. You’re gaining equity because someone else is paying that down for you. Then you couple that with appreciation, and at the end of the day, in 30 years, you’ve made quite a bit of money because someone paid down your mortgage and that house has appreciated in value.

#4. Depreciation = Tax Savings

Depreciation are paper losses that the government allows you to take on your taxes so that it reduces your taxable income. These are not actual losses. These are paper losses, and it reduces your taxable income. You can pay less in taxes. The government wants people to buy real estate. They want people to provide homes for other people. And so by doing so, they give you a tax benefit called depreciation. Talk with your CPA about how that could work, but it can save you quite a, of money on your taxes each year.

Combined with all these different ways, the 4 Primary Pillars of Investing Real Estate has time and time again, proven to be the top investment source for all the top investors and how so many middle-class Americans have gained their wealth over the past century.

Note: This should not be construed as tax or legal advice. Consult with your own attorney, CPA, or tax planner.

Curtis Chism, Realtor
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Chism Team | DRE #02105113
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