5 Things Real Estate Investors Can Be Thankful For
To all our friends about to celebrate with friends and family over a delicious turkey dinner, we wish you a Happy Thanksgiving!
No one’s life is without problems. Especially around the year-end and the holidays, life can get downright stressful. But Thanksgiving is a chance to count our blessings and remember what we have to be grateful for.
Real estate investors have a lot to be grateful for. If you own rental real estate, here are five things to be thankful for. Maybe they aren’t as crucial as your health and your family … but hey, every little bit of gratitude helps!
1. Passive Cash Flow
Few investment vehicles offer the opportunity for passive cash flow — money that shows up in your bank account every month without you having to suit up and report for work.
This is because, since time immemorial, the economic potential of real estate has been based on tenancy and monthly rent payments. If those rent payments exceed the expenses, you are — if you’ll pardon the seasonal pun — in gravy.
Why is passive cash flow better than income from a job? Because with enough passive cash flow, you can achieve financial freedom — the ability to stop “trading your time for money,” for good. Click here for a deep dive into the concept of “financial freedom.”
2. Wealth Building Through Appreciation
As many homeowners get to find out, real estate tends to grow in value over time. As the owner of the property, this means your net worth increases with it. Your net worth is simply the value of your assets minus your liabilities.
Real estate, your car, your investment accounts, the cash in your brokerage account, your jewelry and precious metals … these are all assets. Your mortgage, car note, credit card debt, consumer debt, college debt … these are all liabilities.
When your property appreciates in value, you have more equity. You are wealthier … but only on paper. You can’t actually take property equity into a store and use it to buy a quart of milk or a Lamborghini. But, you can turn that equity into cold hard cash if you sell or refinance the property.
3. Debt Leverage
Real estate is unique among investment vehicles in that it is easy and relatively low-risk to add leverage to your investment strategy. This means borrowing “other peoples’ money” (OPM) to increase your exposure to the appreciation we mentioned in #2. Of course, the borrowing we’re talking about is the common mortgage loan.
Here’s the easy way to understand leverage — if you pay cash for a $100,000 property and it appreciates $20,000, you have grown your net worth by 20%. But, if you only put 20% down ($20k) to purchase the same property, and it still appreciates $20k, you have doubled your money.
Of course, leverage always adds risk to an investment. Your cash flow is lower, and if you can’t make the mortgage payment you’re at risk of default.
That’s why a MartelTurnkey property is such a smart investment — we have taken a lot of risk out of the equation by doing the renovation for you. In many cases, you get to buy with a tenant already in place. Nothing validates the rent potential of a property like someone who is already paying that rent.
4. Principal Paydown
As time passes, your property value is not only getting bigger — your debt is getting smaller. Conventional mortgage payments include interest and principal repayment. The principal paydown starts out small, but gets bigger over time. Regardless, as the debt gets smaller, your equity increases — and with it, your net worth.
MartellTurnkey recently adjusted its projections to account for principal paydown, giving you an even better idea of how much wealth you stand to build over time with a MartelTurnkey investment.
5. Tax Benefits
Finally, real estate investors tend to be happy campers at tax time. The US tax code includes many provisions that make it easy to reduce your tax bill — even eliminate it entirely. Imagine owing the IRS nothing, or getting your entire tax withholding refunded. With real estate investment, it’s a real possibility. Click here for a more thorough exploration of the tax benefits of real estate investing.
If you want even more to be thankful for next year, consider adding another MartelTurnkey rental property to your portfolio. Or, if you’re new to us, consider acquiring your first one!
Click here to view our current inventory of available properties in carefully-selected growth markets. You may be surprised by how low the barrier to entry is, and how easy we make it to buy with confidence, without ever setting foot on the property!
Until then, from the team at MartelTurnkey, Happy Thanksgiving!