We really wish more people could get excited about buying and keeping real estate. They could see what it can do for them. What we do as professional property managers is to try to educate them about the benefits of real estate. Most people think that it is just about cash flow. Trying to get cash flow isn't actually that easy. Rents are increasing, but other expenses are increasing as well.
Looking at only cash flow is not the way you should look at real estate. You could put $100 into an IRA each month. Over 30 years, this monthly investment would earn you $36,000. If I told you that the same $36,000 could become $300,000, $400,000 or $500,000, would that $100 investment per month still make sense for you?
What could your life be like with real estate in 20 or 30 years from now? You could have tenants paying down your mortgage and enjoy appreciation in the value of your property. Appreciation in value refers to the increase in your property value over that period of time.
When I think about my first house, I remember paying just $75,000 for it. Today, that house is now worth three or four times that value. It is all about time. Time is your friend. When real estate prices go up, you end up easily paying off your mortgage.
During that entire time, you also get a tax write-off. With most investments, you do not get a tax write-off. In many cases, they actually tax you more. With real estate, you get a tax deduction for depreciation on the building. You get tax deductions because of your major repair costs, maintenance expenses and management fees. Even your Surevestor policy is considered a tax deduction. You just do not see the same kind of tax write-offs with any other investment vehicle.
We talked about appreciation, depreciation and tax deductions. With inflation, our dollars have less buying power. Real estate can go up, and it takes more dollars to buy it in the future. This means the real estate will hold value, but the dollar will become devalued. Because of this, owning real estate is a hedge against inflation.
It is a beautiful thing when you can have a tenant paying down your mortgage. Over that period of time, you will end up getting to own that real estate free and clear. It is a beautiful thing.
We love discussing this with our current and potential owners and investors. If you have any questions about how this could impact your investment property or property management in Phoenix, please feel free to contact us at Service Star Realty!
