7 Reasons Why Buying an Investment Property Is a Smart Move

Today I’m going over the top seven reasons why now is the best time to take advantage of an investment property.

In my last couple videos, we went over the market conditions to see if we are headed for a crash in next couple years. The answer is no. We are going to see a healthy market with a steady 5% to 6% appreciation instead. With that in mind, I want to share with you how to increase your wealth by investing in real estate.

There are seven reasons why now is the best time to take advantage of an investment property. 

1. Leverage. By putting the 25% down for an investment property, you have one-to-four leverage, or 25% controlling 100%.

2. Tax shelter. You have 27.5 years to depreciate the value of the building. Let’s say it’s a $1 million purchase and the building value is 80%. That 80% value divided by the 27.5 years gives you a $29,000 write-off. Even though the building is breaking even, that $29,000 write off offsets your other income.

3. Cash flow. With most of the properties you can buy right now, you will see 5% to 6% on the first year’s return. The next year, with a rent increase, you’ll see more.

Now is a great time to purchase an investment property.

4. Appreciation. Historically we have an annual appreciation rate of 6%. That means your $1 million building will be worth $60,000 more next year.

5. Inflation protection. This goes hand in hand with appreciation. The average depreciation has been 6% in California, while the average inflation has been 3% nationwide, so that’s great protection of your earnings and assets.

6. Mortgage paydown. The mortgage paydown is roughly 1.5% every year, and that will give you back the principle. You’ll pay that 1.5% each year for the first 10 years and it will add to your equity.

7. Tax deferred exchange. In real estate, you can protect your gains and move it to another property without having to pay a tax. 

If you have any questions about investing in real estate or if you are looking to buy or sell a home, feel free to give me a call or send me an email. I look forward to hearing from you.