Achieve Financial Freedom With Real Estate
Personal and Corporate Finance, The Financial World
Real estate investing has long been known as one of the simplest ways to build wealth and passive income. Four of the most important ways to make money with real estate investing are appreciation, equity, monthly cash flow, and tax advantage.
Appreciation should never be your motive for buying investment property, it should only be the “icing on the cake,” secondary to cash flow. If you by a property in anticipation of it appreciating, that is not investing- it is speculation, and is not the correct path to financial freedom.
Equity is the value of your property minus the amount you owe on your mortgage. As your tenant pays you rent, and you use that rent to pay the mortgage, the amount of your loan decreases as your equity increases.
The most important ways real estate investing earns you money is through monthly cash flow. This is calculated by subtracting your monthly operating expenses from the rent you receive from your tenants on a property. The reason this aspect of real estate investing is so important is that your monthly cash flow is known as “passive income,” and is what determines how wealthy you are. You calculate wealth buy figuring out how long you could live off your passive income- meaning, if you quit your job today how long could you live not touching your principle? According to this definition, most Americans are not very wealthy. If you had 15 rent houses (which you could purchase in 5 years with only $25,000 of personal money), that cash flowed $200 each, you could earn enough money to retire and be wholly financially independent!
The final way real estate investing makes you money is tax advantage. As we discussed earlier, real estate typically appreciates in value, but the IRS allows investors to depreciate the physical house, reducing the amount of taxes they owe. Investors can also write off many operating expenses when filing their tax return.
Related posts:
- Is The Rush Limbaugh Weight Loss Real?
- Kitchen Cabinets In A Time Of Financial Crisis
- The time to buy is NOW for Charlotte investments.