Imagine working hard, saving diligently, and planning wisely to buy your first real estate property. You do your research and learn everything you can about real estate investing. You get your down payment in place and your funding lined up. You find just the right property. You’re nervous, yet excited as you close on the property. You get a renter in place.
And then the first rental check arrives in the mail. It covers your mortgage plus gives you a few hundred dollars extra. It’s an amazing feeling! You still have more work to do, but you’ve started. It’s no longer just theory—you’re really in the game. You’ll have bumps in the road and you’ll make mistakes. But you’ll learn from them and your portfolio will grow, as will your independent cash flow.
Cash flow is king!
Cash flow is the number-one reason for real estate to be one of your top considerations for 5 Day Weekend investments. Your goal is to create enough cash flow in a few years to fuel your desired standard of living in perpetuity.
In addition to positive cash flow, here are other reasons to love real estate:
- Bonus #1: Leverage. With real estate you get instant leverage by paying a small percentage of the total purchase price as a down payment, and then controlling 100% of the asset. And, over time as you make monthly payments, you increase your leverage because of the declining mortgage balance. Leverage enables you to borrow more to fund new investments that produce more passive cash flow for your 5 Day Weekend.
- Bonus #2: Building Assets Faster. Because of leveraging, the net worth of a real estate portfolio can be grown much faster than traditional investments.
- Bonus #3: Natural Inflation Hedge. As inflation rises, real estate appreciates with it over the long run. Plus, you can raise your rents (and cash flow) over time to compensate for inflation.
- Bonus #4: Increased Tax Advantages. Interest on real estate loans is tax-deductible. You can avoid paying capital gains taxes as you buy and sell real estate via the IRS tax code called a 1031 Exchange. Plus, there are several other deductible expenses that help lower you tax and increase your increase your cash flow.
- Bonus #5: No Early Withdrawal Penalties. Unlike 401(k)s and IRAs, you don’t have to wait until age 59½ to access and leverage your equity.
- No Penalties for “Insider Trading.” In the stock market you get penalized for leveraging confidential information to your advantage. No such penalties exist for being on the inside track with real estate!
In my next post, I will look at how you go about buying your first property.
I’d love to hear from you. Have you ever yet considered investing in real estate as a means of generating income? What happened? Thank you for sharing!
Secure your copy of the “5 Day Weekend” book. 5 Day Weekend: Freedom to Make Your Life and Work Rich with Purpose [Nik Halik & Garrett Gunderson]
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