By Ruthven Phillip

eal estate is one of the most exciting investment opportunities. However, unless you are committed to active engagement, this type of investment opportunity may not be for you.

What makes this investment unique is—as one of my friends described it according to the biblical story in Genesis—God hasn’t created any more land since “in the beginning.” Land is a finite resource, a limited in supply. It’s no wonder then, that many investors can generate wealth or improve their financial portfolio through real estate. Here are four reasons why this is true:

Cash Flow

Real estate investments provide an opportunity to generate positive cash flow if you decide to become a landlord. Cash flow, in simple terms, is the money left over after you have paid all the monthly bills associated with owning that rental property. Positive cash flow begins with identifying the appropriate property and determining what type of rental income it presents, making the necessary improvements for rental purposes. There are several other factors and calculations necessary to help you generate positive cash flow, but the key is making sure your numbers are solid. And by the way, if you do decide to become a landlord, you’ll need to develop a team of support professionals who can provide services when needed.

Appreciation

A simple definition of appreciation is the increase in value of an asset over time. Whether you decide to flip or buy, hold or rent out your property, appreciation is the natural tendency for real estate prices to rise over time. I would refer to this as natural appreciation. This just happens because of inflation, inventory shortages, and other market conditions over time.

Investors also create appreciation when they purchase property, improve it, and resell it at a greater price, which moves up the value of homes in those communities. As an investment, you have to consider locations where prices are likely to increase, if this is your strategy. But generally, even if you do nothing, natural appreciation will occur and you can experience a gain or profit from your investment.

Paying Down Loans

When it comes to investing in real estate, most people will borrow money to purchase investment property which will result in monthly mortgage payments. But as most of you know, those early monthly mortgage payments go towards paying down the interest and not the principal. However, the amounts you receive in monthly rent will be applied towards reducing your mortgage balance which is one of the fastest and surest ways of increasing your wealth. Real estate provides the opportunity for someone else to pay your bills while you become wealthy!

Tax Savings

Well, no conversation concerning investments will be complete without mentioning taxes. The federal government and Internal Revenue Service (IRS) provide many more options for real estate investors than other sectors or areas of the economy. While I will not detail all of the benefits, there are qualified business expenses that you can write off. They include: depreciation costs, pass through deductions, capital gains, opportunity zones, and 1031 exchanges, to name a few.

As you consider your next investment option, think about real estate and whether or not it is for you.

Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Advisor, and CEO of Give2Getrich, LLC Give2Get Rich, LLC 2022. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.