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Carmen Badan Foege
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RealPro Realty LLC.
Naples, Florida

 

INVESTING IN REAL ESTATE

Let's look at some of the reasons why smart investors own real estate.
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#1 Real Estate as an Investment

Rule#1 in Real Estate Investing: "Make money when you buy a home, not when you sell it"

money-house

If you have any doubts that real estate is a good investment let’s presume that you bought a house for $300,000. You made a 10% down payment and took a conventional loan for $270,000. Over the next ten years you home value appreciates to $500,000. In the meantime your mortgage decreased by $90,000. Your equity in your home went up to $320,000 making you a net profit of $200,000.
After 10 years of paying rent, you would have missed out on $200,000 worth of wealth.

investing-in-homes

#2 Real Estate Investments as a Hedge against Inflation

No matter what happens to the value of your dollar, your home will provide you with a hedge against inflation.

Most homeowners will have a fixed rate mortgage and pay monthly interest and principal over a period of 15-30 years. In the beginning the interest part of the monthly payment is higher than the principal and slowly it changes allowing the homeowner to lower significantly the amount owned. The monthly payments will stay the same while the home prices, rental fees and incomes are going up.

So, over years, as a homeowner you will hedge against inflation by paying the same amount every month even when your home has increased in value while as a renter, your monthly fees will certainly go up.

#3 Building Wealth with Real Estate Investments


"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."...Warren Buffett

tax-savings

Owning real property has always been considered a safe and effective way to built wealth. While you observe an increase in equity over the years, you can borrow against this equity and invest in more income property or you can convert this property into cash by selling your property.

Your credit score will improve and you will be able to take loans at a lower interest rate just by making your mortgage payments on time. This is an advantage that most renters don’t have.

Homeowners have significant tax advantages as property taxes and interest paid are usually deductible from the federal income taxes. When you decide to sell your home, the exemption on capital gains taxes has been raised to $500,000 for a couple filing together and $250,000 for a single owner, for a two year period ( please check with your tax advisor for more information). So unless your profits are above the aforementioned numbers (and let’s hope they are) you pay no taxes on capital gains.

 

 

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