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Make Money with Real Estate Investing Part 1
You always hear about people who made a lot of money investing in the stock market and then lost everything, but you hardly hear about real estate investors who go bankrupt. That's because it rarely happens. Yeah, that's right; those that invested wisely in real estate years ago are living a comfortable lifestyle now. Real estate investing can bring lots of money, so here is some invaluable information for those that are just getting started or considering investing in real estate.
Investing in real estate requires time, entrepreneurial skills and a vision and perhaps a little risk. It is like starting your own business. This is probably why not everyone is jumping on the real estate bandwagon. You need to deal with an array of tenants, good ones and bad. Just like a business you have to deal with operating and fixed expenses like heating electrical bills and renovation costs.
There are great benefits of real estate ownership. Like being your own boss and having the freedom to travel while earning money, and increasing your net worth. Here are some other benefits:
Cash Flow - Cash flow is the difference between your income and your expenses on a piece of property. You can have both positive and negative cash flow. Obviously, you would feel better if it is positive.
Appreciation - Appreciation is the increase in value of property. There are 2 kinds of appreciation. The first is economic which is beyond our control, such as inflation. The second kind is market appreciation. You control this by improving property.
Leverage - Leverage is the ability to borrow a percentage of the value of a piece of property. Real estate offers a high degree of leverage.
Amortization - With leverage, or the use of others people's money, comes a repayment schedule. Your outstanding balance is being reduced with every payment you make. Part of each payment goes to interest (applied first), and part of your payment goes to principal. The principal reduction is called amortization - reducing dept. Hence, amortization can make you wealthy - slowly and steadily.
Tax Advantages - Owning real estate with the goal of making profit allows you to deduct interest payments and other expenses come tax time. Owning real estate is a great way to achieve your financial freedom.
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