THE BEST INVESTMENT TO MAKE BY AGE 30 – REAL ESTATE
A good rental property strategy, if planned wisely, will build cash flow, provide a long-term retirement strategy, and create incredible tax benefits.
Let’s look at some of the benefits:
PROPERTY AND EQUITY APPRECIATION
Property and equity appreciation are my favorite long tern benefits in owning rental properties. Real estate appreciation is an increase in the fair market value of a property over time. The National Association of Realtors (NAR) reported real estate nationwide has averaged more than 6.74 percent appreciation annually during the past 50 years. However, that figure varies greatly depending on the State, County and City. Evaluate each property based on local appreciation rates.
Equity is an increase in what you own versus the mortgage holder. As you make your mortgage payments your equity increases. You want your tenants to pay your mortgage payments AND provide positive cash flow, each month. That is my definition of a good rental income property!
As your equity in the property increases as well as property appreciation, over the years, you increase your net-worth. If you begin to buy real estate investment property in your 20’s or 30’s, depending on the loan you utilized, you can have a mortgage free property in 15, 20, 25 or 30 years.
PAYING YOUR MORTGAGES WITH YOUR TENANTS HARD EARNED MONEY
When you purchase wisely, the property should at minimum break even in cash flow, because the renter is paying the mortgage for you.
Today over 40% of Americans rent.
This principal/equity increase within the mortgage is an ongoing tax-free benefit, along with appreciation, that you can count on over time.
PAYING LESS IN TAXES!
By owning rental properties, real estate investors qualify for tax deductions on several expenses associated with the rental property and the tax benefits add up.
- Depreciation of the property,
- Travel to your properties or to look at potential investments (including meals, airfare, hotels, rental cars, etc.),
- Property taxes,
- Home Owners Association Fees,
- Routine repairs and maintenance,
- Major Repairs,
- Your home office and supplies,
- Mobile phone,
- Tax preparation services,
- Legal Services,
- And MORE!
These tax deductions will have a positive impact on a real estate investor’s wealth, and leads to early retirement for many! Under U. S. tax code, rental properties lose money on paper. You need to understand all potential deductions and I suggest discussing with your CPA. Although some losses are capped, against your other income, eventually you realize the write-offs, and the tax benefits can be YUGEEEE!
DIVERSIFICATION OF YOUR PORTFOLIO
I guarantee you the U.S. is going to have a recession and correction in the stock market. I have no idea if days, months or years. Real Estate can also correct in its value, but typically is less volatile versus stocks, bond, mutual funds, etc. I have a portion of my net-worth in rental properties for exactly that reason.
POSITIVE CASH FLOW- EVERY MONTH!
GOOD real estate investments allow you to generate a consistent positive cash flow [rental income – rental expenses]. Positive cash flow will help you increase your net-worth, save and invest and for many leads to an EARLIER or more affluent retirement.
I recommend, when you are financially ready, begin investing in rental properties by the age of 30. This will become a key source of your retirement income. And on that day you finally quit that boring day job, you can play at top volume: “TAKE THIS JOB AND SHOVE IT”, for your boss. Well at least play it in your head!
I purchase property based on achieving positive cash flow and Return on Investments (ROI). I will be showing you a real and recent example of that analysis in next week’s blog.
I learned the value of owning rental properties from my favorite Uncle, Nathaniel Boney (in the middle of below picture, with my brother on the right).
He inspired me through his actions to convert my first home into a rental property when I was in my late 20’s.
I currently own several properties in NC and Chicago. My tenants have paid off five mortgages and the properties generate a positive cash flow monthly (money in my account- direct deposited into savings for future properties or equity investments.)
I successfully turned my rental properties cash flow into my personal pension plan with constant monthly payments and intend to grow my monthly cash flow over the next 12-18 months by buying additional good rental properties.
I encourage you to explore this option as I honestly believe if you select good properties, it is a rewarding path forward.
Next week’s blog will show you the analysis I used on my August 2019, purchase.
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I am a proud nerd (as my beautiful wife and daughter have told me) investment and finance blogger, with a NC State, Chemical Engineering, University Rutgers, MBA and Harvard University, Advanced Management education.
I started my first business at ~13 years of age. I am a successful investor in equities and real estate and happy to share my personal finance and investment lessons learned with you. However, I am NOT a licensed financial advisor. Please do not construe my suggestions on this blog, as recommendations for your personal situation. For individual finance advice please seek your own licensed CPA or financial advisors.
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