Top 3 Reasons To Invest In Single Family Homes
Here are 3 reasons to invest in singly family homes. One of the incredible benefits of investing in real estate is that you can choose to invest in a number of different asset classes including:
Commercial, Multi-Family, raw land (subdivision, infill lots), Mobile homes in parks, Mobile homes on land, Single Family Homes and Duplex’s and Quads. Which is your favorite? Leave me your comments below.
Here are the top 3 reasons that I like to invest in single family homes.
1. Leverage – Maximize Your Return on Investment
Learning to use other people’s money for your investment will allow you to leverage your single-family homes 100%, which provides an infinite return on investment.
Instead of investing your cash and using your credit, you can learn to buy single-family homes and invest your knowledge into your deals.
Even if you decide to finance with a bank, you’ll likely be making a 20% down payment on your single-family home. If you buy a single-family home for $100,000, you’ll need a $20,000 down payment as your investment, but the cash flow you create will be a strong return on that $20,000 investment.
2. Growth – Equity, Amortization, and Appreciation
All investments are expected to grow. There are a number of ways that single-family homes will grow your investment.
Houses are still relatively cheap. On top of the overall pricing being attractive, real estate investors know how to buy houses on sale in every market. A $100,000 house can be bought for $70,000, which creates $30,000 of equity upon purchase.
Additionally, if you finance your purchase with with a bank, you will enjoy amortization that comes with principle pay-down, so you owe less on your investment each year.
Interest rates have been low for a long time now, none us can predict how long this will last but as long as they are very low it will remain a good time to buy single family homes.
Over the past few years, most markets have enjoyed nice appreciation levels. In West Coast markets, Florida and Las Vegas there has been tremendous equity gains from appreciation. No one knows how this will continue in the years to come. I add it as an additional potential investment advantage. Real estate tends to be hyper-local, so every market and every sub-market is different. In each market there are pockets of gentrification adding another form of forced appreciation.
3. Tax Benefits
As you begin investing in real estate and holding onto your investment, you realize there are a lot of great tax advantages that accompany your investments. For example, rental income is considered to be passive income and not subject to self-employment tax.
Depreciation allows the investor 27.5 years of deductions on your property and the equipment that makes them habitable (heat pumps, appliances, etc.). Mortgage interest is typically the investor’s single biggest annual expense, but the good news is … it’s deductible. Other expenses that can provide tax benefits can include mileage, home office, repairs, etc. The depreciation is a huge benefit to investing in single family homes.
These are the first 3 reasons I like to invest in single family homes. How about you? What is it about investing that you really enjoy? Maybe transforming houses and neighborhoods to their former glory, monthly cash flow or something else? Leave me your comments below!
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