Real Estate Investments That Make Sense

Our mission is to provide unbiased information and advice to residential real estate investors nationwide. Steve Setka, the owner and primary consultant at Nationwide, is available to provide you with information and insights that will position you to acquire income property investments with a high probability of yielding an exceptional return with a minimum amount of risk. Real estate investments are an essential componant to increasing level of wealth.

BUILD WEALTH WITH REAL ESTATE  

Many of the wealthiest people achieved there high net worth with substantial real estate investments. There are four main ways that real estate investments can help you create and retain more wealth compared to other investments. First, real estate investments that are financed multiply returns in an appreciating market because of leverage. Second, real estate investments have the most favorable tax treatment of all investments. Third, real estate provides the best hedge against inflation. Forth, real estate investments are bought and sold in an inefficient market place, which provides opportunities to buy investments at below market and sell properties at a premium.

Leverage allows you to control an investment with a fraction of the cost and benefit from returns based on the full value of the investment. To illustrate this concept, let’s consider two investors who buy two identical new properties for $100,000. Investor A buys the home for cash; Investor B finances his property with an $80,000 loan and puts $20,000 down. Both investors sell their properties in one year for $110,000 net of closing expenses. Investor A realized a 10% return on her investment ($10,000 profit divided by $100,000 investment). Investor B Realized a profit of $5200 after the $4800 in his loan interest payments were deducted, he realized a return on his invested dollars of 26% ($5,200 divided by $20,000). If Investor B had $100,000 to invest, he could have bought 5 properties and realized a total profit of $26,000; this is considerably higher than the $10,000 gain Investor B obtained on her $100,000 investment.

There is substantial tax benefits associated with real estate investments. The two main advantages are the ability to deduct depreciation from your annual income and the option to exchange your property instead of selling to postpone the payment of capital gains taxes. The IRS allows property owners to deduct a portion of the building’s value every year, which reduces your taxable income without an actual cash expenditure. When you get ready to sell you can elect to purchase another investment property using the procedures under section 1031 of the tax code, which can eliminate any taxes due in the year of the sale. The tax advantages associated with real estate investments are covered in more detail in the “Tax Advantages” section of this Website.

Financial and economic experts agree that investments in real estate are the best hedge against inflation; this could be particularly beneficial in the near future if the proposed large government deficit spending causes a sustained period of high inflation.

Real estate is bought and sold in an inefficient marketplace. The real estate market is considered inefficient because information is not universally available instantly, like the stock market. All participants in the stock market can easily get the same information related to the current or future value of a particular stock at the same time. There isn’t any substantial advantages that one investor has over others that would enable them to buy an under-priced stock or sell a stock at a premium to an investor that doesn’t have the access to the same complete information relating to factors influencing the value. In fact, it’s illegal for people to make money buying or selling stock with “inside information”.