ROBERT J.R. GRAHAM: Six Benefits of Owning Rental Property

by: Charrissa Cawley

During a real estate downturn it’s easy for someone to overlook the big picture and question why they should be interested in investing in the residential real estate market. It can be difficult not to listen to media reports and members of Congress talking about how hard it is to be alive. Don’t forget that before this real estate downturn, real estate was the hottest investment you could find. While it’s true that what goes up must come down, it’s also true that everything that falls eventually reaches the bottom, and bounces back up. Here are six reasons to invest now and be ready for the big bounce when it does come.

• Passive Monthly Income – By investing now and using your head by performing some simple calculations, you can ensure that you have more money left over at the end of the month than you need. This positive cash flow is like a gift that keeps on giving because it will show up in your mailbox every month whether you’re there to meet it or not. $200-$300 per month may not seem like a lot of money, but when you have 5, 10, or even 20 checks like that coming in that you don’t have to earn doing some repetitive or backbreaking job, a seemingly inconsequential amount of money can suddenly look pretty good.

• Security – A small child may rely on a blanket, a pacifier, or a thumb for a sense of security. Recent events have demonstrated that — while we may be older — we still like to feel confident that we have options during scary times. Owning real estate gives you that same feeling because you know that regardless of what happens you still have options.

• Depreciation – Thanks to the generosity of the U.S. Congress, real estate allows you to take an annual tax deduction for the loss in value of your real estate. Ironically, while you are busily taking a tax deduction for the lost value, the actual worth of your property is going up. Real estate has taken a temporary hit, but you get the depreciation credit even when real estate values increase (which is most of the time).

• Capital Gains Taxation – whenever you purchase something and its value rises while you own it, the federal tax code requires you to pay a special tax on that item when you sell it. Fortunately, no tax is due until you sell it. While there are a couple of steps involved, you can also extend the time you have to pay that tax in the event that you do sell it, which is a major benefit to all those who are able to capitalize on this little quirk of the tax code.

• Appreciation – Real estate appreciates – increases in value – far more frequently than it loses value, and with these increases come the opportunity for you to add to your net worth. You’ll still have the monthly income your positive cash flow provides so you have a second way to cash in on real estate – a third way if you bought it at a great price. You could look at the trickle of monthly income as a down payment on the flood of cash that will come your way through appreciation – value you can benefit from by selling or by pulling equity out to help fund future purchases or use for anything you like.

• Pride of Ownership – Do you remember how proud you felt when you got your first car? It may have been a beat up Volkswagon, but it was yours. Imagine how your chest will swell with pride when you drive down the street and look at your house, and you realize that you own another just like it across the street, and several others that are even nicer around the corner. There’s no better feeling in the world than knowing that you own something that so many others only dream about.

There are lots of great reasons why you should want to own real estate; these are just a few of them. I can appeal to your desire to build a portfolio of appreciating assets that will add to your net worth on a year to year basis. You can look at your net worth on paper and try to comprehend what all those zeroes mean, but the biggest prize will be the looks of adoration in the faces of your family when they realize that your time is their time, that they have your undivided attention, and you can go anywhere or do anything you want to because you had the good sense to start investing when a lady named Charrissa told you it was a great idea.

So invest now, and reap all of the rewards that are waiting to come your way.

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