Beginning Real Estate Investing - Why Invest In Real Estate?

A plethora of investment options are available to people looking for places to invest their savings. One such option is beginning real estate investing. It is a highly rewarding investment option and if you do decide to make money in real estate investing you will enjoy excellent returns on your investment, much more than most other investment options.

Real estate investment has the enormous potential to give huge returns. You can borrow the money from a bank to finance your real estate investment. Most of the banks are willing to finance 90% of the cost, so you can get into a deal with a 10% down payment. This gives you a 10 times return on your investment. Let's take the example - if you have $10,000 to invest and assume you get 10% return regardless of the investment vehicle you use. If you invest in stock market to buy shares worth $10,000 then at the end of 12 months, your investment is worth $11,000. Instead, if you invest the same money into real estate with 90% bank loan, you earn 10% on the total $100,000 investment and you will endup with $110,000.

As you see from the example, your $10,000 has been doubled using real estate investment, whereas it could only produce an extra $1,000 in the stock market. You can understand the reason for this - your lender's money is working for you too. That is the power of leverage and is one of the greatest advantages of investing in real estate. As you will see, there are many more advantages to make money in real estate investing.

Tax breaks on account of depreciation of property is an important reason for becoming a real estate investor, at the earliest. While in reality the value of property is appreciating in its value, due to increase in the value of land, you get to claim a tax deduction on some notional tax loss, or in other words your taxable income is significantly lower than your real income. Great!

A great tax benefit is the 1031 exchange. This exchange is defined by the IRS Code. This exchange permits investors to delay the payment of capital gains taxes if the gains are later reinvested in another property that meets the codes guidelines. The government wants people to stay in the real estate market and reinforces this with this tax benefit.

One final benefit of beginning real estate investing worth mentioning here is the flexibility of sale contracts. Unlike the stock market you can get very creative with your offers.