Larry Garrett in his book “Common Sense Investing in Real Estate” writes about the advantages of owning Real Estate. You should always check with your accountant regarding your particular situation. However here is what Larry Garrett states are the reasons for owning Real Estate:
1. Owning your own home should provide a higher quality of life with much more personal satisfaction versus collecting a drawer full of rent receipts.
2. You will build up equity. If you put 10% down on the purchase of a house and that house appreciates at 8%, the appreciation is based on the total value of the property, not just the down payment. Also, you are probably going to be forced to save by paying down the principal on your mortgage.
3. Owning your own home gives you financial leverage. You can buy property with a very small down payment, or possibly, no down payment at all. When you borrow, you are using “other people’s money” and taking advantage of financial leveraging.
4. If you buy the right home in the right neighborhood it should appreciate. It is absolutely critical to buy in an area that is appreciating as fast as possible, now and in the future.
5. If you are purchasing investment properties, depreciation is a non-cash write-off that will enable you to lower your annual taxable income by allowing you to lower the value of buildings and equipment for income tax purposes.
6. You will be reducing the amount of money you must pay towards your State and Federal Income taxes because you can deduct interest and property taxes paid on your owner occupied home and a vacation home. Plus, you get to take depreciation on your investment properties and deduct all appropriate business expenses.
7. Income may be generated from “positive cash flow” on rental properties.
8. Equity build-up is the most important reason that I invest. Where can the average American family invest their money and get as great a return on their investment as they can on real estate? You can truly become rich with your real estate investments. I have seen estimates that show 95% of the average American family’s total wealth at their time of retirement came from their real estate investments.
McMath Realty specializes in helping investors with their investment properties. Call us if we can help you.
Weldon McMath – McMath Realty Property Management