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Put Your Money in Real Estate Buying or investing in real estate is considered to be the ideal kind of investment and so you should put your money in it. The popular word IDEAL expresses the key benefits for investing in real estate. The IDEAL word stands for income, depreciation, expenses, appreciation and leverage. Your real estate should give you income every month for example from rents, and this is what the “I” stands for. You could be experiencing times of vacancy but your real estate will give you income most of the time. Take note when you are starting with your real estate investment that you do not exaggerate your assumptions but take into consideration all possible costs in running your real estate. Real estate investors should know that when they purchase a property, money will be spent for it every month termed as their negative cash flow. If your mortgage has a high balance, this would affect your funds monthly, and so be aware of this so that you will try to have a positive cash flow that would realize your income. With the depreciation standing for the IDEAL acronym, you can use depreciation for your tax benefit. Depreciation is said to be a non-cost accounting method that takes into account your overall financial burden that you face by investing in real estate. It is said that in some areas, their IRS would allow investors to deduct from their yearly taxes the expenses that they have incurred related to their real estate investment. It is a great benefit for people to use the concept of depreciation and make it a tax shelter by changing the positive cash flow derived from the depreciation into a negative paper loss that will be deductible for income tax purposes. When it comes taxes and depreciation, on the other hand, it would be advisable for you to get the help of a tax professional to assist you in this matter.
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It is said that generally, the expense, which stands for the “E” in your word IDEAL, will be deductible from your taxes for as long as the expenses incurred are about your investment property. Examples of these expenses that you pay are cost of utilities, cost for insurance, mortgage, and interest and property taxes.
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When you invest, there should be an appreciation of your investment, and this is what the “A” of the IDEAL stands for. Whenever we invest, one of our main reasons in the first place is to grow our net worth. The best part in investing in real estate is you have somebody who is paying you to live in your property, that will make you pay off your mortgage and give you a positive income every month. Standing for leverage, the “L” in IDEAL is referred to conby many people as also OPM or other people’s money. Leverage is considered as less risky than leverage in the stock world because you are using a small amount of money to manage a more expensive asset.