Finance Articles

Today's market offers investors a variety of investment means. One of the most rewarding opportunities is real estate investing, which can produce a very good income stream. If you choose to become a real estate investor, you will enjoy several benefits not associated with other types of investments.

The first benefit of investing in real estate is enormous: financial leverage. Even if the money for your real estate investing is borrowed, with a 10% down payment, your returns are instantly magnified 10 fold. Regardless of the investment vehicle, with an investment of $10,000, the return on your investment will be 10%. For example, if you chose to invest in the stock market by purchasing $10,000 worth of shares, within the first year your investment is worth $11,000. Now, investing that amount in real estate, with a 90% loan at 10% earnings on the full $100,000 investment, results in $110,000.

The power of leverage is one of the biggest advantages which 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 occured 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 representating 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 you real earnings, which is very nice.

A more beneficial tax benefit could be the 1031 Exchange. The IRS code 1031 allows investors to defer payment of taxes on capital gains made through property sale provided that the proceeds are invested in another appropriate property. This great incentive therefore is a step by the government to urge investors to stay in the market.

Another advantage of investing in real estate is the flexibility of sale contracts. You can get very creative with your sale contract offers. There is no limit on what you can exchange for a property, instead of just cash. This can mean greater returns and some fantastic win-win scenarios.