10 Killer reasons for real estate in your 2020 portfolio

You generated a great level of success, so naturally you start thinking about the sustainability of investment portfolio. With all the ups and downs going on and talk of recession, you want to ensure that everything you worked so hard for is protected.

Whenever your non tangible wealth may be in question you want to monitor what is happening in the world and most often incorporate more tangible wealth into your portfolio. You are now at the point of looking for vehicles to help you maintain and sustain that prosperity. As we are all getting older, it is now time where you can enjoy life without having to work every day.

While there are a number of vehicles to consider, here are some very compelling reasons to incorporate real estate into your investments.

10 benefits to having real estate in your investment portfolio:

1. Property investing is tried, true

With some diligence on investing you’ll learn that better than 90% of the millionaires have made all or parts of their wealth on real estate investing. It is a tangible asset that has been creating millionaires for years. Hard to dispute the facts.

If it works for the Warren Buffets of the world, it can work for you too. Did you know that many celebrities and pro-athletes count on real estate investing to protect their large salaries? I read the other day that Ellen Degeneres may be the most successful real estate investor in the country as she has bought, renovated and sold many multi-million-dollar properties and has made millions doing so.

2. Most sustainable investment

What makes real estate such a highly sought-after investment class is its sustainability. The U.S. population continues to rise, currently growing at the rate of netting 1 new person every 11 seconds. Do the math and you will see the staggering number of housing units the country needs to keep adding month in and month out. (Currently the number of households are out pacing the number of housing units, this spells opportunity and sustainability).

Take care of the property (or better yet have your property manager take care of the property) while you sip margaritas on the beach and the property will keep providing cash flow, equity build up and tax benefits. Best of all values will continue to rise doubling, tripling in value. For optimum performance, reposition your assets to the next emerging market as markets shift and you will be one of those (90) percenters that made millions in real estate.

3. Most Control over your investment

The challenge with most investments is you have little or no control over it. With Real estate you have controls over the operation and growth of the investment. If it is not performing as you anticipate you have the control to increase rents by doing some upgrades. You can sell when the market suggests you should sell, allowing you to sell quickly for top dollar and reposition to the next emerging market. As every investor is different, the ability to have control over your investment is paramount for you to truly get what you desire in an investment.

4. Residual cash flow today all the way through your retirement and even on down to your heirs

Every month your tenant pays you rent and essentially pays your monthly investment expenses for you. What you have left over is that highly sought after positive cash flow. The beautiful thing is most of your expenses are fixed and your cash flow (through annual rent increases) should rise to keep up with inflation.

When buying in emerging markets and riding the economic wave of prosperity of each market, you can grow higher than the rise of inflation which gives even more positive leverage.

5. Tax deductions reduce your annual tax liability

I just sold a property to a person from California and the number one reason he is purchasing is to gain the many tax benefits that real estate affords. Not only can the expenses for your property create tax deductions to offset your income, you can also depreciate the property which adds to tax incentives that can actually assist in reducing the tax liability from your main sources of income.

Talk to your tax preparer about this. The most intriguing aspect about investing that my newer clients find thrilling is the savings they make when doing their tax preparation work. To increase the benefit, the more properties you own, often lowers your tax liability even further. (this is a benefit simply not found in other investments)

6. Equity build up

This is a benefit that is often overlooked as it is a passive income stream hiding in the background. Indeed, there are multiple streams of income (or benefits) from real estate. When you use leverage and finance the property, your tenant essentially makes a mortgage payment for you.

A portion of that mortgage payment goes to reducing your principal. As this principal gets reduced it obviously gets recaptured as positive cash growth to you when you sell. This is building your equity each and every month (try getting that benefit from another investment source).

7. Appreciation

Many consider property value growth to be the number one wealth building principal available today. This is what most seasoned investors look for in great investments.

It is the increase in value from what you purchase an investment for and what they sell it for. In real estate it is just one of the many benefits.

8. Leverage

Unique to real estate investments is leverage, the ability to finance the investment, letting someone else (your tenant) repay the investment while you enjoy the benefits of the appreciation off of this borrowed money. When you buy a 100K property with as little as $20K of your own money the $80k of borrowed money is capturing all these wealth producing benefits of the bank money.

This is so cool there should be a song about it. Where are my song writers?

9. A self-generated savings plan

One of the toughest things for people to do is to continually add to a savings plan. Once you generate a down payment for an investment and then use leverage to magnify the investment, you have a self-generating savings plan.

The interesting thing I have found with my clients (present company included) is that as you see these savings (your net worth) grow, you become more and more compelled to save more. The speed and size of the savings (magnified by all 5 wealth building principles) is indeed much more significant than you can see with a typical savings plan and this is a strong motivator to continue to build that wealth.

10 You help create affordable housing for others.

Beyond all the financial benefits of investing in real estate you are actually providing a much-needed service. Housing supply is said to be in short supply, can you think of a better investment than one that provides for one of a persons most needed necessities while having the only investment that encompasses all 5 wealth building principles. Now that is an investment worth owning.

Happy investing!