In our opinion, real estate investing is the best way
to watch your money grow over time, and the rewards far outweigh the risks. Nothing is certain, of course, but here are some things to consider:
- As the economy improves, employment rates increase and housing demand follows suit
- Rental demand is showing unprecedented growth, and is expected to continue for the significant future
- Interest rates are still near historic lows, and will eventually rise, sparking a huge demand
- Waiting to get into the game will cost you in lost opportunity gains, in all of these price categories
All these factors point to rising residential income property prices in the near future. As the old saying goes: "Now is a great time to buy"
. This applies to income property extremely well
Mortgage Balance Down▼ - Equity Up▲
Paying off your mortgage is a great way to build equity. It is a normal part of the lending process, and a significant contribution to the concept of leveraging your investment.
Say you purchased a $800,000 fourplex, putting 25% down at a 4% interest rate. Your monthly mortgage payment (principle + interest) would be $2,865.
At the beginning, your mortgage balance is $600,000
. You are paying $865 a month towards principle, and $2,000 a month towards interest. The principle payments are very small at the beginning. The lender wants to maximize their interest collection. However, they gradually increase and the ratio changes.
In this example, by year 5, you will have reduced your principle balance down to $554,067
Which means you have accumulated $45,933
in equity in those 5 years. If you sold the property then, that money would go into your pocket (less closing costs, etc.)
Several factors can help your financial situation relative to income properties. The major tax benefits
- Mortgage Interest Deduction
- Property Tax Deduction
- Expense Deductions
As with owning your own home, tax benefits
can help turn an apparently unattractive situation
into a positive one
when managed appropriately
*** We highly recommend that you consult your tax professional for complete and accurate tax and accounting information applicable to your situation.
What better way to leave something to your heirs, or even just to get family members started in real estate investing?
Share the investment
, share the rewards
, then let them build their own real estate empire