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7 Reasons to Build a Real Estate Property Portfolio:

Did you know it is commonly reported that approximately 90% of the world’s richest people made their fortunes from real estate? Here are the 7 fundamental reasons why you should seriously consider building your real estate portfolio:

  • Tax Deductibility:
    • Your payments toward interest, taxes, and insurance can serve as a substantial tax deduction at the end of the year. Unlike any common investments available today, this feature alone makes it stand out from the rest.  Additionally, maintenance and improvement expenses can also be tax deductible, further increasing its function as an amazing tax deduction.
  • Control
    • Unlike many other common investment vehicles, real estate allows you, the investor, to add value to your investment by your own efforts. One way you can do this is in the form of “sweat equity.” Sweat equity is value added to real estate by making improvements to the property such as kitchen remodels, room additions, landscaping, etc. Essentially, adding salability or functionality to a property by your own efforts or contracted efforts.
    • Another method to add value is to alter the functionality of your investment. Primary residence, rental, home business, etc.
  • Leverage:
    • leverage is the concept of taking borrowed funds to reinvest to yield higher returns. In real estate, you take loans (mortgages) to purchase property and in many scenarios can take ownership with little or even NO MONEY down. It is hard to imagine any other investment that you can be a part of with virtually no cash out of your pocket AND with the potential of yielding amazing returns.
  • Sustainable:
    • The real estate market has an incredible likelihood to avoid market “busts” because of the main fundamental difference between it and other investments that have “busted”: its functionality. Unlike stocks, real estate is functional. It is a home. People have an inherent use for it. As long as sound real estate investment fundamentals are taken into consideration when investing, you can yield high returns regardless of market conditions.
  • Predictable:
    • The following graph shows that although there are periodic minor dips, the California real estate market has shown a predictable, consistent growth trend for decades. As long as you invest with a long term mindset, the likelihood is highly positive.
    Graph

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  • Profit Twice!
    • Appreciation : Appreciation is the growth of your property in value. The fundamentals laws of supply and demand indicate that the value of well located property will inevitably increase dramatically in value over time. This is due to the ever growing population (demand) and the ever decreasing amount of livable land near city areas (supply).  This further reaffirms the previous point and graph.
    • Cash Flow: Another way to profit is through cash flow. Your real estate investment can yield cash flow if it is used correctly. The most common form of generating positive cash flow is by renting the property at a rate to exceed the cost of sustaining it.
  • Multiple Functions:
    • The beauty of real estate is that most units can serve as multiple functions outside the traditional use. Yes, purchasing real estate for your primary residence is a sound investment decision for the commonly known reasons: tax break, appreciation, etc. But real estate can also yield returns on investment by altering the functionality. Many investors today utilize their real estate investment as rentals to generate cash flow, room for rent, board and care facilities, room and board, independent living facilities, and so on.
    • By keeping in mind your options, you increase the possibilities to make your next real estate investment as profitable as possible and you provide for yourself sound back up plans to ensure it is profitable.

 

. If you have any questions, comments or concerns, please let us know.

Dycor Realty & Mortgage, Inc.
12396 World Trade Drive, Ste. 118
San Diego, CA 92128
858-592-9798 office
858-592-9068 fax
Lawrence@dycorrealty.com

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