Yes it’s true. For a variety of reasons real estate is an incredible investment for the long term. I was reviewing the recent publication of Forbes Magazine that listed the 400 Wealthiest Americans (1.3 billion to qualify) and real estate was a major part of the holdings of these individuals. Just think back for a moment as to what your parents or grandparents paid for their homes and what those homes might be worth today.
Real estate has some unique benefits. You can leverage your purchase. The initial investment should be large enough to avoid too much negative cash flow or it should be based on the affordability of your family. With amortization the monthly payment pays down the principle balance and increases your equity every month. Even though the values have been going down recently they will turn around very soon and slowly go up again. History has proved that.
You and your family can live in it. Try to do that with stocks or savings accounts. There are favorable tax benefits while you own and favorable tax benefits when you sell. For a principal residence you can deduct the interest paid and property taxes paid from your income each year. On rental property you can also deduct these things from the income earned and any repairs or other costs associated with the ownership of the property. When you sell you can have a $500,000 deduction on the profit for a principle residence and on a rental property you can structure a 1031 tax deferred exchange to grow your real estate holdings. You can also increase rents over the years to increase your cash flow monthly.
On rental property you can drive by and look at it. Ownership gives you a feeling of accomplishment. You can create jobs — for gardeners, pool men, contractors etc. — which is very good for the economy.
The past couple of years have created what we have now, a buying opportunity for many of you. Do that buying with confidence and finance with a conservative loan within affordable guidelines for your family. Hold real estate for at least 10 years and you will be amazed at the results.
For any further information regarding our local real estate market, please call Dody Rogers at Re/Max Realtors at 661-702-4515, ext 5012.