American Industrialist and billionaire, Andrew Carnegie said that 90% of the world’s millionaires made their money through Real Estate. Whether this number is accurate or not, wealthy people have for eons loved investments in Real Estate for the following reasons and you should too.
Top Reasons Wealthy People Own Real Estate
- Tax Benefits: The tax benefits for owning Real Estate are incredible. Governments around the world usually create favorable tax policies towards Real Estate: Here are the top three tax benefits among several of owning Real Estate: i. Tax deductions: such as property taxes, property insurance, mortgage interest etc. ii. 1031X: The ability to sell your real estate investments and buy other investments without paying capital gains tax is special to Real Estate unlike other investments class. iii. Depreciation: Depreciation is one of the most powerful tools that makes Real Estate attractive to wealthy people. It is a phantom “loss” that wealthy people use to eliminate their tax burdens. Wealthy people love depreciation because it can help you reduce the taxes you pay from your Real Estate income and other income sources as well.
- Leverage: This is an incredible way to increase your return on investment. Real Estate is unique in its ability to acquire leverage or debt due to its self-collateralizing nature. Unlike other investments, it is relatively easy to get a loan for a Real Estate investment.
- Cash Flow: This is perhaps the number one reason Wealthy people love Real Estate. Real Estate investments produce consistent cash flow to its investors. The cash flow you get in Real Estate investments makes the investment less speculative than other investments.
- Appreciation: Most Real Estate has steady and predictable appreciation due to inflation and consistent cash flow. Barring an unusual interruption in supply and demand for any reason, Real Estate typically appreciates at a steady pace.
- Equity Pay Down: Is a way to build wealth while other people (tenants) help pay down your mortgage. This is a powerful tool of making money while you sleep.
- Forced Equity: Real Estate is unique in that most of its investors can personally affect its value through creativity and operational prowess. Investors can personally affect the value and equity of their investment by either making some upgrades to the property, increasing rents, reducing expenses or a combination. There are a myriad of ways that investors can forcibly increase equity in Real Estate that is not present in other investment classes.
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