time to invest in real estateIf recent good news about real estate values have made you think you’ve missed out. You haven’t. Here are 11 reasons it’s real estate is still a great investment.
  1. Leverage – Real estate is one of the few investments where you can use someone else’s money — namely, the bank’s, to pay for most of it.
  2. Pride of Ownership- It’s difficult to drive your family past your stock portfolio and point to it with pride. A nice duplex, however, with great curb appeal is an investment you can touch and be proud of.
  3. Tax-Free Growth – While you should never buy an investment property and count on appreciation, history suggests that it is reasonable to assume given enough time, it will be worth more than you paid for it. As this happens, you are not taxed on that appreciation until you sell the asset. And when you do, you may want to consider a  1031 exchange or contract for deed to lessen your tax liability.
  4. Tax-Free Cash Flow – Thanks to depreciation and mortgage interest deductions, your cash flow may not be taxed.
  5. Tax Write Offs Against Your Day Job – Check with your accountant, but there’s a reasonably good chance that your investment property will give you so many tax deductions that you can use it against your other income.
  6. More Tax Deductions – Owning an investment property is like owning a business. As such, paying your son to mow the lawn is tax deductible, as is driving past to check on the property. Not only does this help reduce your annual taxes, but it may help offset future capital gains taxes as well.
  7. Forced Retirement Savings – For most of us, it’s tough to have the discipline to consistently put extra money in an IRA or 401k. However, the money tenants contribute toward the mortgage of an appreciating asset is comparatively easy to save. After all, the bank requires payment, and the amount you pay off on your loan every month will help fund your retirement later.
  8. Diversification – Having investments in both real estate and the stock market helps you hedge against crashes in either market.
  9. Infation is Rent Friendly – One of the few investments you can make that will keep pace with inflation is real estate. After all, it keeps pace with market prices.
  10. Reliable Returns – If a property has a positive cash flow when you buy it, there’s no reason to think provided that you properly manage and maintain it, that it won’t for years and decades to come.
  11. Prices Are Still Depressed – While real estate values have begun to make a comeback, they are still well below the highs of 2005 and 2006. What this means for investors is smaller multifamily properties that previously were too expensive to produce much of a positive cash flow are now providing double digit returns.