4 Ways Income Producing Real Estate makes you money

Are you still on the fence about investing your hard earned dollars in to income producing real estate? You can keep sending your money to Wall Street and be subjected to the highs and lows of your money constantly going up and down, and in many cases invested in to something you don’t know anything about. Even worse, it could be invested in a company that goes against your values.

Or you can control your own destiny and invest your money in one of the safest and surest ways of making you more money, which is income producing real estate.

Below I explain all the ways real estate can make you money, and in many cases all at the same time. You definitely don’t get this with your money when Wall Street has it.

  1. Tax Advantages

    I am not a CPA, so I am not going to provide you tax advice. However, I will tell you that when you own income producing real estate you are now operating a business. And businesses get tax advantages that an indovusal W2 employee do not have.

    The most taxed income you make is from a W2 job. When you have income producing real estate you can use some of the following to reduce your personal taxes.

    A. Depreciation: is the incremental loss of an asset’s value, generally due to assumed wear and tear. As a real estate investor that holds income-producing rental property, you can deduct depreciation as an expense on your taxes. That means you’ll lower your taxable income and possibly reduce your tax liability.

    B. Pass through deduction: Allows you to deduct up to 20% of your qualified business income (QBI) on your personal taxes.

    C. 1031 exchange: This is when you own a income producing property and you sell it. The money you make above and beyond what you paid for it, you wont have to pay taxes on it as long as you invest that money in another similar property within a certain time period. I recently did one of these myself. Very simple process. Just make sure you let everyone know at the very beginning what you are doing and then find an attorney that can assist you with it.

    D. Write offs: This is the biggest tax benefit. You get the opportunity to deduct any of the expenses tied to owing the real estate. All of the insurance, taxes, interest on the mortgage, maintenance, etc. Additionally, you can deduct any of the expenses accrued to operate the real estate business. Thing such as advertising, office space, business equipment, etc.

    All of these deductions lessen your taxable income from your W2 job.

    As i said, I am not a tax expert so please consult your CPA before purchasing income producing real estate.
  2. Principal pay down: This is the big one. If you buy the right real estate with the right terms the tenant will pay your mortgage each month. Which means they are paying down the loan for you.
  3. Market Appreciation: This is the one that is not talked about enough. Real Estate historically doubles every 20 years, and in the case of the last three or four years, this has been exponentially increased. Now, the last few years are historical highs for real estate.

    We all know that property values have and will continue to go up. Which means your wealth is going up as well. Because as you owe less, and the property is worth more than you paid. You make money.

    Typically the fed tries to keep inflation around 2% a year. Which means your real estate even if there is no market appreciation at all, will typically go up each year by no less than 2%, just because of inflation and the cost of everything has gone up.
  4. Cash Flow: In an earlier post (see here) I talked about cash flow and cash on cash return. As you can see above with the other ways income producing real estate can help you make more money or save you money, my hope is it is providing you additional income on a monthly and yearly basis as well.

    Different people have different strategies when it comes to owning investment real estate. I call it income producing, because I want it to provide some cash flow over and above the costs of owning it, in addition to the other benefits of it. However, some people will invest in an asset and in some cases may take a loss on a monthly basis hoping that the assets value will increase significantly making the losses the incurred early on in owning the asset is wiped out.

    Again people have different strategies for their investment goals. You have to decide them for yourself.

My mentor says it like this. “Don’t wait to buy real estate, buy real estate and wait.”

As you can see from all the ways above that real estate can make you money, it is not a get rich quick scheme. When you decide to buy your first income producing property, you must think long term especially in todays market.

Real Estate has created more millionaires than any other business.

What are you waiting for?

To your success and your future.

3 ways to increasing your income

I am around a lot of people who want to increase their income.  I think that is a worthwhile and valuable goal to have.  It is a goal that most of us have on some level, I know I do.  Now is the time when I can hear some of my readers saying: “It’s not all about money”, “What about being happy”, “Work-Life balance”.  This post isn’t for the ones saying that, so you might want to stop reading now.

No, this post is for the ones who do strive to Be Happy and Make Money.  For some reason our culture thinks that if you want to make a lot of money, you have to work 24/7 and be miserable.  That just isn’t the case.  The goal should be to do work that matters, and to do work that you love.  When you are doing both of these things your income will go up and you wont be miserable.

What does it take to increase your income. I can only speak for me when I give advice in this area.  My suggestion is this.

1.  Do work that matters and you love:  If you are miserable. Stop doing that.  If the money is too good to quit, then you need to work on an exit plan. An exit plan could be going back to school to increase your skills.  Taking a class on a certification of some kind. Your exit plan could also be a side job that you are passionate about.  I know some people take side jobs for the money.  Well, that is only motivational for a period of time.  Doing something for the money regardless of how lucrative it is eventually becomes hard to do on the side.  You eventually lose that motivation.  It has to be something you are passionate about, that you want to do.

2.  Work: This is obvious right?  I think it is as well.  Most people are putting in a lot of work.  But a lot of work towards what?  A lot of work in the job that pays them a good salary.  Sure, you should do that.  But you eventually hit a ceiling.  Yep, a ceiling on what you can earn.  In Seth Godin’s book, LinchPin, he discusses the org chart of value.  The more value you bring to the marketplace, the more money you can earn.  The top three tiers in that chart are in this order from bottom to the top (there are other ones as well):  Sales, Connecting, Creating.  If you have the ability to sell, you bring a lot of value to the marketplace and your company.  If you can sell and can connect the right people, and have the right connections, you bring a higher value to the marketplace.  And then lastly, if you can create something you create your own value in the marketplace and the earning potential is endless.

Sales, Connecting, and Creating all require work.  The key is finding the time to do it.  Maybe you already do this in your job.  If not, think about how you can get yourself on that path.

3.  Invest: Using your own money and putting it into something where you seek a return or a profit.  I believe the best investment you can make is in your own personal and self-development.  The second best investment is into something that will give you a return on your money invested.  I personally like real estate. Stocks and mutual funds are great as well. Investment into a business where you can get a return when the company is successful can be a very lucrative way to increasing your income as well.

I am a person on this journey of life, like everyone else, just trying to figure it out.  Sometimes I think I have it figured out and then I realize I don’t.  But I know that the three things I mentioned above will get you closer to the income you desire.

To your success and your future.