Hello, real estate investors! Today, we're talking about passive income.
Sounds interesting, but what is it? Well, passive income is when your money makes you money without having to go to a job to work for it. You're probably familiar with this with an interest-bearing savings account or a dividend-paying stock. Today, I'm going to tell you the five reasons why I love to use real estate to create passive income.
Reason #1 is cashflow. What do I mean about cash flow? Well, when you have real estate such as apartment buildings, those apartments generate monthly rental income, which after paying expenses, when you invest in the right real estate, you can create extra cash and cash flow that goes right to your pocket.
Reason #2 is appreciation. Because real estate is a real asset, it has intrinsic value and can grow over time. In fact, we're going to go through in another video something called forced appreciation, where in fact you can change the value of your real estate by taking actions to improve its value, both through good management and through rehabilitation.
Reason #3 is tax advantages. For a long time, the United States tax laws have been very advantageous to incentivize homeownership and construction. That means that much of your cash flow can be at a reduced tax rate or even tax-free legally, in some circumstances. There's a concept called depreciation that helps fuel those tax savings, and we're going to talk a lot more about depreciation and how that works in a separate video. So stay tuned for that.
Reason #4 is leverage. What I mean by leverage is that when you purchase a piece of real estate, you can often take a mortgage or a loan so that you only have to put up a small portion of the overall value. So, for instance, in a $500,000 building, you may only have to put up $100,000 but you have a $500,000 asset going to work for you. Ultimately that means you get some better returns on your cash that you've deployed.
Reason #5 is the inflation hedge. Inflation is when the same thing costs more, and since real estate is a real asset, it tends to follow inflation. And because it has intrinsic value, it is not subject to the wild swings that you see in paper-based assets such as stocks. These are my top five reasons that I love real estate for passive income.
And if you're interested in learning more about the insider secrets to real estate investing, make sure to grab my ebook, The Insider Secrets of Real Estate Investing: To Live Life On Your Own Terms.
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