Should I sell or buy myself (FSBO)
First, investing in real estate has an enormous benefit of leveraging financially. Even by borrowing money for real estate investing from a bank you may often get a deal with a down payment of 10%. This means your returns may be instantly increased tenfold, assuming you have $10,000 for investing and you get a 10% return on that investment, regardless of the investment vehicle. Putting this in the stock market will buy you $10,000 in shares and 12 months later your investment is worth $11,000. Putting the same money in real estate with a 90% loan, you end up earning 10% on the entire $100,000 investment and end up with $110,000.
The power of leverage is one of the biggest advantages real estate investing offers. In the example above, $10,000 has been doubled in the real estate market, whereas it only increased by $1,000 in the stock market. This occurred because the lender’s money is working for you too. And this is only one of many reasons to become a real estate investor.
Another good reason for investing in real estate comes from the tax benefits. One of the greatest tax breaks associated with real estate investing is the REQUIRED depreciation of the property by the IRS. This is representing a ”paper loss,” but in most cases the value of the property (including land) is increasing. In essence, you end up paying taxes on a reported figure of profit that is actually lower than your real earnings, which is very nice.
There is, perhaps, an even greater tax benefit in the 1031 exchange as defined in section 1031 of Internal Revenue Code. What this essentially allows is for an investor to delay the payment of capital gains taxes after the sale of a property as long as the gains are reinvested in another appropriate property. Here the government basically encourages an investor to stay in the market because of this great incentive.
A final benefit to investing in real estate worth mention is that sale contracts are flexible. Unlike your investment in the stock market, you are able to get very creative with the offers you make. You are able to trade almost anything for a property instead of cash; this has the potential for increased returns and spectacular win-win situations.
- Scott Roemermann http://www.stressfreetrading.com
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