WHY IS INVESTING IN REAL ESTATE SO LUCRATIVE?
Today, I want to talk about why real estate such a powerful wealth, building tool. So there are five main reasons for this. So, cash flow is number one. That is that monthly income that you're collecting from these properties. Second is the use of Leverage, meaning, you don't have to bring all the money to table to buy these things. You can get a loan second or third is the equity that gets built up as that loan is paid down you building equity. Third is appreciation
over time. That property gets more valuable. And then the tax benefits, these are huge, because it's not what you make, it is what you keep. So, in this video, I'm going to break that down. So, let's start with cash flow, okay? So, cash flow is the difference between what you bring in every month in rent? Other fees you might have. And the expense is going out, the difference. There's the cash flow and you should always buy for cash flow, if it doesn't cash flow, don't buy it. Because no matter what the market does, as long as Cash flowing, you are safe.
So that's number one, rule leverage, we talked about that. So usually, you can get a loan on real estate, that's going to cover 75 to 80% of that property. And this is Magic, this is Magic money because where else can you buy something where you don't have to put down all the money. Right. Real estate is considered pretty safe asset. So, banks are happy to lend on it. So, Leverage is key Equity again, as that loan is being paid down. By your tenants, not buy, you
the difference between that loan and what you bought it for? That is equity build-up. Then after that, we have appreciation and that is the value of that property going up over time. So, we've all heard our parents or our grandparents talk about what they paid for that house back in the day, right? You're always floored like, what do you mean you bought a four-bedroom two-bath house for like seventeen thousand dollars, right? That would blow us away today. Well, that is appreciation just over time. Real estate tends to go up in value. I say buy real estate and wait, don't wait to buy real estate because it's going to get more expensive.
And then the next one is tax benefits. There are tons and tons of tax benefits to real estate. Again, it's not what you make is, what you ultimately, keep that makes a difference. So, passive income is taxed at a lower level than ordinary income. So, you're already paying less on that income than you do on your W-2 jump. Then there's the depreciation.
And there's a whole host of write-offs for your expenses and interest rates on loans and things like that. But you're basically going to also depreciate the value of a property that actually going up in value. It's kind of silly to think about, but you get to write that off. So Real Estate Investors often have a lot of paper losses on something that makes money. So that is losses that you can use to write off other income that you have in other sectors of your life, right? So, there's pass through deductions that can allow you to Wake up to like 20% of your qualified business income
against your personal taxes. I'm not a tax expert neck and go into all of that talk to your tax consultant but it's very powerful tool, long-term capital gains when you sell something that you have held longer than one year, you are in the long-term capital gains versus short-term capital gains which is fairly expensive. But again, that's a much lower income bracket and in some cases, there may not be any income. Tax due
on a property that you sell after you've owned it for years that. But that depends on what income bracket you are in and what else is going on. There's also something called a 1031 exchange where basically you get to defer any income that you made off of it, you get to push it, onto your next investment, and the next investment and you could potentially defer it forever and not even leave it as a tax burden, for your heirs, it kind of goes away. Set to one that gets passed on to them.
Again, that's a whole other discussion but another tax benefit further when you're investing in bigger properties. Like you might through a real estate syndication, there's often cost segregation and accelerated depreciation again, that's more advanced strategy. I'll save that for another video but basically means you can take bigger deductions sooner. So yeah, those are kind of the five main reasons why real estate is so important. Cash flow Leverage, Judge,
which is the magic money, right? The equity appreciation, and all those tax benefits. So, it's not what you make, it’s what you keep and real estate. You get to keep a lot of it. So, check out blue Vikings capital.com for more information and helpful tips. Hope this has been helpful to you.