Ah, August. A month known for its sweltering heat and for the fact that it’s sandwiched between two important holidays: One that commemorates independence (July 4 in the US and July 1 in Canada) and one that celebrates the contributions of laborers (September 6). 

Of course, August is also a month spent in anticipation of Back to School season. Whether school starts as early as mid-August where you live, or in the beginning of September, there is no shame in early preparation. School (and college/university) may be a distant memory, but it never hurts to brush up on the basics. Relax – there won’t be a pop quiz!

This month, in the spirit of lifelong learning, I’d like to re-teach why real estate investment makes sense:

Real Estate is Lucrative for the Wise Investor

Cash flow can be an extremely appealing reason to go into real estate investing. If you know how to use it to your advantage, you can find a property with a positive cash flow that can set you up with a greater return and steady passive income. Positive cash flow works like a safety net in case anything comes up – like a new heating and air conditioning unit, or other costly repairs. Cash flow tends to improve over time as you pay down the mortgage and build equity – excellent news for you!

Appreciation is another solid way to turn a profit, as real estate values increase over time. When it is time to sell, your property will likely be worth thousands more than what you paid for it. Rents also rise over time, which means higher cash flow. 

You build equity as you pay down a property mortgage. As equity increases, so does your net worth, and you will have the leverage to purchase more properties, thereby increasing cash flow and wealth further. 

Real Estate Means Real Benefits

There are numerous tax breaks and deductions for the real estate investor. As stated in the April newsletter, you can deduct the reasonable costs of owning, operating, and managing property.  This allows you to utilize more of your resources doing what you love most – investing!  

Another advantage from real estate investment is the potential to diversify. Compared to other major asset classes, real estate has a low (sometimes negative) correlation. To put it simply, adding real estate to a portfolio of diversified assets can decrease its volatility and provide a higher return per unit of risk. 

Real estate provides the investor with more leverage. Because real estate is a tangible asset that can serve as collateral, financing is readily available to you. 

Closing Notes

Real estate offers countless benefits and can truly bolster an investor’s portfolio. It is lucrative in terms of cash flow, appreciation, and equity that grants you leverage to purchase more properties. In addition to that, there are many benefits in terms of tax breaks and deductions, a diversified portfolio, and readily available financing. 

I hope you enjoyed this mini-lesson – Have a fantastic August!

Jacky Fils

A LAUGH OR TWO FOR GOOD MEASURE

HELPFUL LIFE HACK #2

WHY INVEST IN REAL ESTATE?

Leverage

Leveraging allows you to do more with the money you have. With more capital, you can invest in a property with greater potential for return and therefore make more money than if you were only to put in the available cash you had access to.

Leverage is an important concept to understand and ultimately utilize for real estate investors. The idea of investing in real estate is to generate wealth, and the use of leverage is one of the key ways you do that.