is it good to investing your money in real estate?

Is it good to Investing Your Money In Real Estate?

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As entrepreneurs find success with their primary business ventures, many search for the proper investments for their profits.

Of course, we can and should all start traditional tax preferred vehicles like an IRA and 401k. These are the bedrock of good 'benefit' planning for ourselves and our employees. I'm also convinced more entrepreneurs should consider real estate as an important part of their portfolio.


1. Gain more leverage. Real estate is one of the few investment vehicles where using the bank's money couldn't be easier. The ability to make a down payment, leverage your capital, and thus increase your overall return on investment is incredible.


2. Grow, tax-free. Buying property based on speculation of its value is a dangerous tactic since cash flow is the key. However, appreciation over the long-run is certainly realistic and at the least you should be considering a tax-deferred strategy. In the future, you may even consider a 1031 exchange, charitable trust, or an installment sale to lesson your tax liability further.


3. Tax free cash flow. It's no secret that because of depreciation and mortgage interest deductions (if you leverage your capital), your cash flow should be tax-free. That's right! The far majority of the time an investor will never pay taxes on their cash flow and can wait for capital gains on the sale of the property in the future.


4. Increased tax deduction strategies. Property affords investors with another incredible opportunity to convert personal expenses to potentially valid business deductions. Don't forget that real estate is a business. This means that travel expenses to check on your properties and payments to family members who manage your properties (such as students away at college) can be deductible and increase the tax benefits when it comes to cash flow and the future sale of the property.


5. We lack the self-discipline to put a monthly deposit into our IRA, SEP or 401k as small-business owners. However, buying a property is a significant commitment that you are required to commit to and maintain. You will always be grateful in the long-run when you don't give up on it and build future cash flow and wealth.


is it good to investing your money in real estate?

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