Control
When you buy stocks or shares of a mutual fund, you have no control over the value of that investment. There is very little you can do to increase the value of that investment. All you can do is sit back and hope your ship comes in.
On the other hand, real estate offers much more control as there are countless things you can do to improve the value of your investment. For example, when you own a rental property, you can increase the value of that property by improving it so that you can increase your rental income.
Tax Advantages
There is no greater investment available for taking maximum advantage of legal tax savings than real estate. Real estate is the only investment for which the government (at least in the U.S.) has created so many tax benefits. Only with real estate can you be generating income, yet through write-offs show a loss and therefore receive tax savings.
Why does the government create tax savings for certain investments? Because they want to shape social policy! The government WANTS you to invest in real estate. It's fundamentally beneficial for the economy!
Cashflow
When you invest for cashflow over capital gains, you create a passive income for yourself that not many other investments can match. The money keeps coming in each month as your tenants pay their rent, no matter what the value of your home does.
Investing only for capital gains appreciation is just another form of speculating and gambling. Just as people do when they buy stock in a company and hope the value of that stock goes up, capital gains investors buy property with negative cashflow and count on that appreciation to come through in the future and bail them out. This is not how to invest in real estate!
We are neither gamblers nor speculators. We're investors, and you can be one, too, with the right foundation and analysis.
When you buy stocks or shares of a mutual fund, you have no control over the value of that investment. There is very little you can do to increase the value of that investment. All you can do is sit back and hope your ship comes in.
On the other hand, real estate offers much more control as there are countless things you can do to improve the value of your investment. For example, when you own a rental property, you can increase the value of that property by improving it so that you can increase your rental income.
Tax Advantages
There is no greater investment available for taking maximum advantage of legal tax savings than real estate. Real estate is the only investment for which the government (at least in the U.S.) has created so many tax benefits. Only with real estate can you be generating income, yet through write-offs show a loss and therefore receive tax savings.
Why does the government create tax savings for certain investments? Because they want to shape social policy! The government WANTS you to invest in real estate. It's fundamentally beneficial for the economy!
Cashflow
When you invest for cashflow over capital gains, you create a passive income for yourself that not many other investments can match. The money keeps coming in each month as your tenants pay their rent, no matter what the value of your home does.
Investing only for capital gains appreciation is just another form of speculating and gambling. Just as people do when they buy stock in a company and hope the value of that stock goes up, capital gains investors buy property with negative cashflow and count on that appreciation to come through in the future and bail them out. This is not how to invest in real estate!
We are neither gamblers nor speculators. We're investors, and you can be one, too, with the right foundation and analysis.
Leverage
Banks WANT to lend you money to buy real estate. There is evidence of this almost everywhere you look these days. Just think about how many times you see an ad from some bank trying to take over your mortgage. This is a good thing! Using your banker's money to buy real estate is what allows you to leverage your investment. Let's take a look at an example:
Two brothers suddenly inherit $100,000 each from their rich and recently deceased aunt. One buys $100,000 worth of stock, and the other buys $100,000,000 worth of real estate with a 90% loan from the bank.
A year later, the first brother watches his stock climb 10% in value. The second has a tenant who pays his mortgage payment all year while the value of his property also increases 10%. So the one who bought stock saw a $10,000 increase in value while the one who bought real estate has seen a $100,000 increase. And if he wants to access that increase in value, he doesn't have to sell any portion of his ever-growing asset as his brother would; all he has to do is refinance.
He gets a new appraisal for for $1.1 million and goes to the bank for a new 90% mortgage. He walks away with $990,000 and after he pays back his original loan of $90,000 he's left with $900,000 to spend on whatever he wants! He has a new tenant that pays the increased rental rate to cover the new mortgage. And does he pay tax on that $900k? It's not income so there would be no income tax, and he didn't sell the property so there would be no capital gains tax.
This example is obviously over-simplified, but THAT is the power of leverage.
Banks WANT to lend you money to buy real estate. There is evidence of this almost everywhere you look these days. Just think about how many times you see an ad from some bank trying to take over your mortgage. This is a good thing! Using your banker's money to buy real estate is what allows you to leverage your investment. Let's take a look at an example:
Two brothers suddenly inherit $100,000 each from their rich and recently deceased aunt. One buys $100,000 worth of stock, and the other buys $100,000,000 worth of real estate with a 90% loan from the bank.
A year later, the first brother watches his stock climb 10% in value. The second has a tenant who pays his mortgage payment all year while the value of his property also increases 10%. So the one who bought stock saw a $10,000 increase in value while the one who bought real estate has seen a $100,000 increase. And if he wants to access that increase in value, he doesn't have to sell any portion of his ever-growing asset as his brother would; all he has to do is refinance.
He gets a new appraisal for for $1.1 million and goes to the bank for a new 90% mortgage. He walks away with $990,000 and after he pays back his original loan of $90,000 he's left with $900,000 to spend on whatever he wants! He has a new tenant that pays the increased rental rate to cover the new mortgage. And does he pay tax on that $900k? It's not income so there would be no income tax, and he didn't sell the property so there would be no capital gains tax.
This example is obviously over-simplified, but THAT is the power of leverage.