Cash flow
If you buy right, manage right, and finance, right, there will be monthly positive cashflow. Ensuring that after expenses and mortgage is paid, and you have operating reserves budgets for vacancy, capital expenditures, property management, you have monthly cash flow
Equity build or debt pay down
This is the difference between how good debt and bad debt is truly realized. A portion of your mortgage goes to paying down your principal. The mortgage you are paying over 30 years, that you are producing the monthly cash flow off of, is also increasing in equity.
Appreciation
Since the Great Depression, real estate has appreciated in value every single year. Even though we have had recessions and dips in the housing markets, home values have continued to rise over the long term.
Tax Savings
The IRS may not seem like they are on our side, but the tax code is. One of the misconceptions of how the tax code is written is that they are considered loopholes, but in reality, the government has designed the tax code to incentivize citizens toward a certain action, and this case, to invest, buy, own, and operate real estate. There is a shortage for safe and affordable housing and the population is only growing faster than ever, so no wonder that the government is trying to incentivize people to go invest in real estate. And one of the big incentives is “depreciation” which is on paper the IRS saying that due to normal wear and tear of a property, your property is depreciating, which is counted as a loss, even though you are actually generating cash flow off a property.
Hedge against inflation
The debt and mortgage payment can remain the same for 30 years, even though inflation is occurring, and the value of the dollar is decreasing. By placing cash into a real asset, you are preserving the value of your cash. And this value doesn’t change over 30 years if you have a fixed rate.
Leverage
The ability to only put down 20 percent down payment on an investment property allows you to leverage the other 70-80 percent of the bank’s money, which doesn’t limit resources to just what you have.
