Why Is Real Estate The Best Investment?

I’ve been frequently asked why real estate is the best investment? Here is why I KNOW it is!

I’m going to look at this from both the side of personal properties as well as investment properties:

Personal Properties

In terms of personal properties, we can really leverage our money to our advantage. Here in the US, you can get a 30 year mortgage at a fixed rate, something that can’t be done almost anywhere else in the world. The icing on the cake is being able to put down low down payments and see a cash-on-cash return through appreciation. For example if you were to buy a million dollar home and put down just 10% or $100,000, and if that property increased by 5% you would see a 50% return on your investment. If that 5% continues for 3 years you’re at 150% Cash on Cash Return.

Another benefit of personal property is that you’re hedging against inflation that increases about 2% per year. As the rate of a mortgage is fixed, it becomes more affordable over time for this reason.

Finally you get to write off your property taxes, mortgage interest and you can even take advantage of capital gains tax. Meaning you can see appreciations for a few years and then sell your property for a profit and not have to pay any taxes on the profits of up to $250,000 for an individual and $500,000 for a married couple.

Another such avenue that’s not being explored enough is buying a second home. Certain things like the distance between your primary residence and the 2nd home are required, and you having to use the home for 14 days a year must be met for it to qualify. However, you can get a conventional Non-Investor loan on a second home and after that you can AirBnB it, or just use the space for yourself. You basically get all the same advantages as a primary residence and you can let it appreciate, take tax right offs, and use the capital gains expetion when you sell.

Investment Properties

In terms of investment properties, the first important advantage is that you have control over your asset. Other investment instruments like stocks, bonds, etc. are subject to the decisions of a lot of people but with your own property you can time your investment decisions a lot better. It’s a much more stable investment.

One the hidden benefits is depreciation. You can depreciate your asset over time and get a huge tax write off every year. When you combine that with a 1031 exchange you can see massive tax savings every year.

So not only can you create phenomenal cash-on-cash returns through appreciation, but you can see cash flow (rental income) that will keep up with inflation, and massive tax benefits for years!


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