Articles - Snippits

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.

While your $10,000 has earned only $1,000 in the stock market, it has been doubled in the above-mentioned real estate investment. How? Not only has your own money has been working for you, but your lender's money has, too. This power of leverage is one of the best reasons to consider real estate investing, but it is not the only reason we will give you 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.

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.

One final benefit of investing in real estate worth mentioning here is the flexibility of sale contracts. Unlike the stock market you can get very creative with your offers. You can exchange virtually anything for a property instead of cash which can mean greater returns and some spectacular win-win arrangements.