Why You Should Invest in Real Estate
Want to achieve financial freedom? Investing in real estate is a great option to do so! In this video, we discuss why investing is important and benefits of real estate investing.
In this module, we will cover why investing is important. The purpose of this module is to provide an overview of the benefits of investing over saving. So why do people invest their money? It seems like a lot of work to learn about investing when we work a full time job, right? Why don't we just save her money in a savings account at the local Chase Bank? Well, the main reason to invest is that it allows us to put our money to work to build wealth, the average return of the stock market over the long term is just above 10% as measured by the s&p 500 index. This can allow you to earn more than you initially took in as income. And my absolute favorite reason to invest is to beat inflation. Inflation is a rising costs of goods and services. This makes our dollar worthless, thus decreasing our purchasing power. Let's take a look at a couple of examples. Here's the case of two individuals. Kelsey, on the left hand side says $500 a month and a high yield savings account at Chase Bank paying 2% a year. Kayla on the right hand side invest her $500 in an index fund that contains REITs, earning her and additional 10% each year. Over time the money in the accounts compound after 40 years the earnings are drastically different. By investing at a higher return. Kaler earns over $2 million and Kelsey and can retire happy. Here's another look at why savings accounts are not what they used to be. This chart observes how much income would be earned for a savings account with $100,000. The y axis going up and down shows the dollar value and the x axis going across shows the years dating back to 1994. The dark blue bar indicates how much income is generated in the savings account. And the blue horizontal line indicates how much income is needed to be inflation. As we can see in the 90s interest rates were high. This meant you made a high enough return in a high yield savings account to beat inflation to get over that light blue bar. However, we see a shift as a 2008. With low interest rates and increasing expenses. Our income does not be inflation, which means we are losing value by holding your money in savings accounts. Therefore, it is imperative to invest and not solely rely on savings accounts. So what are the benefits of investing in real estate? Well, for one, it provides passive income and stable cash flow. And investing in real estate is a mathematical formula. By calculating your total income like rent, and total expenses like your mortgage taxes and insurance, you can determine whether a property would make or lose money each month. investing in real estate provides tax advantages like depreciation, over a 27.5 year timeframe, you can deduct the costs of buying and improving a rental property on your taxes. In addition, real estate allows you to diversify your income. If you are a W two worker and invest and a 401k you are 100% reliant on the stock market for your retirement income. If there's a large dip, this can negatively impact your income available at retirement and possibly force you to go back into the workforce. Therefore diversifying in real estate and other investment vehicles is preferred. To combat the tanking of one single asset class leverage in real estate is the ability to use other people's money to buy your own assets. For example, when you buy a rental property, you can typically borrow 80% of the purchase price from a mortgage lender, you only have to come up with 20% of the price on your own. You can't get that kind of leverage in the stock market. My favorite reason to invest in real estate is control. By owning an investment property you get to decide the location type of property, tenants repairs and exit strategy. This is a big contrast to the stock market. For example, if you own a stock in Apple, what control do you have, you are not able to influence the strategy products or employees. With real estate you can take control of your own destiny, which is why it is my beaver asset. In the next lesson we will detail types of investment strategies you can take in real estate. See you there. Investors are tired of using spreadsheets to evaluate a real estate deal. But now they don't have to be. With the property cash flow app, you can enter in a property address. And within seconds have all the data at your fingertips. You get relevant metrics like cash flow, cash on cash return, and expenses. parameters. You can toggle live to change your deal potential graphics to see where income and expenses are flowing, and much more property details. What are you waiting for? Sign up for an API key and get started evaluating deals today. Or take the course to build your own property cash flow app using Python.
Transcribed by https://otter.ai