Information

There are many avenues through which people can get started investing these days, and one of the most profit yielding investments is real estate, which can generate a very handsome income indeed. If you are considering beginning real estate investing, you can look forward to some stupendous gains that are associated with this investment alternative.

Investing in real estate can be very lucrative. If you leverage your down payment to earn a return on the entire value of the property, you could earn a lot more than investing in the stock market. For example, assume that you invest $10,000 in a down payment on a house, and you borrow the remaining 90% from the bank. If you earn a 10% return, you will finish with $110,000. On the other hand, if you were to invest that $10,000 in the stock market and also earn a 10% return, you would finish with only $11,000.

As you see from the example, your $10,000 has been doubled using real estate investment, whereas it could only produce an extra $1,000 in the stock market. You can understand the reason for this - your lender's money is working for you too. That is the power of leverage and is one of the greatest advantages of investing in real estate. As you will see, there are many more advantages to get started in real estate investing.

Tax breaks on account of depreciation of property is an important reason for beginning real estate investing, at the earliest. While in reality the value of property is appreciating in its value, due to increase in the value of land, you get to claim a tax deduction on some notional tax loss, or in other words your taxable income is significantly lower than your real income. Great!

A great tax benefit is the 1031 exchange. This exchange is defined by the IRS Code. This exchange permits investors to delay the payment of capital gains taxes if the gains are later reinvested in another property that meets the codes guidelines. The government wants people to stay in the real estate market and reinforces this with this tax benefit.

One final benefit of beginning real estate investing worth mentioning here is the flexibility of sale contracts. Unlike the stock market you can get very creative with your offers. You can exchange virtually anything for a property instead of cash which can mean greater returns and some spectacular win-win arrangements.