Beginning Real Estate Investing - Why Invest In Real Estate?

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  • Author David Williams
  • Published October 8, 2007
  • Word count 391

Nowadays there are plenty of ways to invest in the markets and best among them is beginning real estate investing. Investing in real estate has some terrific advantages over other investing alternatives. If and when you get started in real estate investing you will get many benefits which are favorable through this investment vehicle.

Investing in real estate can be very lucrative. If you leverage your down payment to earn a return on the entire value of the property, you could earn a lot more than investing in the stock market. For example, assume that you invest $10,000 in a down payment on a house, and you borrow the remaining 90% from the bank. If you earn a 10% return, you will finish with $110,000. On the other hand, if you were to invest that $10,000 in the stock market and also earn a 10% return, you would finish with only $11,000.

Your $10,000 has been doubled in the real estate investment but returned only $1,000 from stock market. This is because of the fact that you have used your lender's money through real estate investment. This is the best part of real estate investing as it gives you power of leverage in the investment. There are more strong and valid reasons for you to get started in real estate investing.

Tax breaks on account of depreciation of property is an important reason for becoming a real estate investor, at the earliest. While in reality the value of property is appreciating in its value, due to increase in the value of land, you get to claim a tax deduction on some notional tax loss, or in other words your taxable income is significantly lower than your real income. Great!

Perhaps an even better tax benefit is the 1031 exchange as defined by section 1031 of the Internal Revenue Code. Essentially this allows investors to delay paying any capital gains taxes when a property is sold as long as the proceeds are reinvested in an appropriate property. The government is basically encouraging investors to stay in the market with this fantastic incentive.

Flexibility is one final benefit of real estate investing. Sale contracts can offer flexibility. Creativity can be used when writing your offers, unlike the stock market. Contracts can include exchanges beyond the traditional cash for property. This can create a greater return and a win-win situation for the buyer and seller.

Beginning real estate investing is one of the most profitable investment options available today.See, how does real estate investing work: assume that you invest $10,000 in a down payment on a house, which represents a 10% down payment and you borrow the remaining 90% from the bank.

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