What Are the Perks When Investing in Real Estate?

Are there many perks to investing in real estate? You bet there are! Real estate investments can give you monthly income, be paid by for by the tenants, provide tax savings and benefits (if you qualify), and increase in value. Here's how.

By Ken Fong

Are there many perks to investing in real estate? You bet there are!

Real estate investments can give you monthly income, be paid by for by the tenants, provide tax savings and benefits (if you qualify), and increase in value.

You are free to select the type of property, location, conditions, and price that you want to pay. If you want more income, you can buy more units and maximize the term of repayment.

Or if you if you want to reduce your taxes, you can use a technique called depreciation to offset your income. You can also concentrate on appreciation by purchasing undervalued properties and selling them for a profit; or you can buy properties, repair them, and sell them for a higher price.

Let me elaborate on the few ways that you can make money in real estate.

1. Generating Positive Cash Flow

You simply rent out the properties that you purchase. You organize the financing so that the repayment is less than the rental that you receive, and in the process have a net cash income.

Besides the net income, you get tax benefits and the potential of appreciation when you do decide to sell the property later.

2. Flipping

You make money by buying properties for less and selling them for more. You can look at older properties that need improvement, or buy newer properties from owners who are willing to let them go at a lower price.

When you buy property that needs to be improved, you must take into consideration the holding cost; that includes taxes, interest payments, utilities, maintenance, and other costs.

Often when you buy a property from a distressed owner, the property is in good condition. The owner may have fallen behind with payments, needs to relocate etc.

3. Leasing

This method involves controlling the property without taking over the title. You lease the property and either sell it or lease it to another tenant until the property sells. This method is a bit more complicated, and has some drawbacks - such as the inability to depreciate your lease - but you can potentially make a huge gain.

4. Buying Tax Lien Property

For tax lien property, you simply make a deposit as designated and wait. You get the property if the taxes are not paid in time. Meanwhile, the deposit is guaranteed by the government, and you can even earn interest!

5. Before Construction

Here, you work out an arrangement with builders to purchase property at wholesale price, and sell when completed at market price. In this method, there is no need to agonize about mortgage payments or tenants during the construction period.

So there are the many ways that you can invest in real estate!