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Are you tired of the poor returns or losses that traditional investments have provided over the last few years ? Maybe it is time to explore some of the benefits offered by investing in real estate in Bryan College Station. In this blog, I will discuss real estate returns vs. traditional investment returns, tax advantages and the control you can have over your financial future but please know I am “just a Realtor” and not your investment broker.
Returns: Real Estate vs. Stocks, Bonds and Mutual Funds.
- a.) Stocks: Only 40% of stocks pay a dividend and in the 10 years starting in 2000 the stocks in the S&P 500 paid an average dividend of 1.82%. During that same time, those same stocks have seen a 30% decrease in equity.
- b.) Bonds: During the 10 year period starting in 2000 bonds have yielded an average of 4.46% according to figures released by the Federal Reserve. Bonds returns are fixed by the interest rate and do not appreciate in value and can fail.
- c.) Mutual Funds: Often under perform the general market, does not pay dividends and you hand control of your money over to someone else.
- d.) Real Estate: In the 10 year span beginning, in 2000, real estate has increased in equity by 30.14%. This does not include appreciation in value, cash flow or the tax advantages that come with investing in real estate. Investment property allows you to be in control of your own money as opposed to the other investment vehicles.
Tax Benefits: What other investment allows you to make money, and the IRS allows you to keep more of it due to generous tax deductions ? Some of those expenses are advertising, depreciation, maintenance, insurance, interest, losses and repairs. Another top real estate investment vehicle is the 1031 exchange which allows you to avoid capital gains tax through the exchange of like-kind properties. To complete a 1031 exchange, a qualified intermediary will need to be used but, it is well worth the effort.
Leverage: With what other investment will a lender allow you to put 20% down and use the investment to secure the balance of the loan? Do you think that your lender would lend you money to buy $100,000 worth of Apple stock if you put $20,000 down? The great advantage of investing in real estate is that it allows you to build equity in a property, sell it and then use the equity and leverage to buy a larger cash flow property. A continuation of this process is what allows you to build wealth.
With the interest rates at an all time low and some nice properties on the market, the time to invest in real estate has never been better. Using a conservative analysis to calculate cash flow and not basing your decision on an increase in equity will improve your chances of being successful in the real estate investment market. For more information or help in finding a property call David Whitener at 979-587-9979.
David Whitener, REALTOR® – I never forget you have a choice