The Best Reasons to Buy Rental Property

Want to know why you should invest in rental properties?
Have you ever thought about real estate rental properties as an investment?
In this article, you’ll discover reasons to buy rental property.

Buying Rental Property

Unlike other investments, real estate investing does require some training, education, and knowledge. But once you overcome these hurdles the land of opportunity is upon you. I believe many don’t get into real estate investing because of there mindset. They simply do not want to educate themselves on the real estate investing strategies and finance. They would rather hand over their money to a broker and hope for the best. But real estate is potentially and in my opinion possibly the greatest way to build wealth.

Consider, President Franklin Roosevelt, when he said, “real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world” or billionaire industrialist, Andrew Carnegie, “Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combines.” And the advice from the wealthy can go on and on.

What is the best way to gain wealth? I think the verdict is quite clear and it is owning real estate. “Landlords grow rich in their sleep without working, risking or economizing” declares John Stuart Mill.

Picture this! Tom and Jerry are both investors and both have $120,000 to invest and both will retire in 10 years. Tom decides to put all his money in stocks and his ROI is 10%, according to Zacks. In 10 years he will have $311,249. He simply hands his money over to a broker and hopes for the best and in his case, he does quite well in stocks.
Jerry, on the other hand, decides to invest in real estate using leverage, tax benefits, and advantages by utilizing a small business and all at the same time increasing his growth with the velocity banking strategy to accelerate mortgage payoff. In 10 years without contributing to his investment he accumulates 7 rental properties fully paid off (free & clear) generating $5,600 in cash flow from rent. Keep in mind that each of his properties is valued at $120,000 each giving him a grand total of $840,000 in assets, again free & clear.
Obviously, there are many variables to both Tom and Jerry’s investments but I believe using Jerry’s strategies with real estate you can also benefit greatly by utilizing leverage, tax advantages, and velocity banking to build up your retirement in record time.

Leverage

Having access to larger sums of money without a doubt offers you the potential chance of greater returns. If you ever heard the term OPM or other people’s money. It is a true and working concept. The concept has flourished in the eyes of the wealthy and among many real estate investors. In reality, this is one of the reasons why the rich are so wealthy. They understand the concept of leverage. Leverage essentially is borrowing for the sake of gain.
When most borrow money they usually borrow without having no desire or idea to grow what they borrow. For most, they are content of paying the monthly bill that includes the cost of borrowing money (interest) on a mortgage, car note, etc. All the while the bank grows wealthy. Leveraging allows the investor to basically partner up with the banks, hard money lenders, private money, etc. Obviously, if you can’t beat lenders and banks at their own game. Join them!

How can leveraging actually work in rental properties

In simple terms, suppose an investor has $100,000. This investor has many options to invest, stocks, mutual funds, etc. Now the beauty of investing in real estate is the control that you have over your investments and the potential increase of capital.
In other words, this same investor goes to the bank and obtains a bank loan to purchase a rental property for $100,000. For a conventional loan, the bank usually requires a down payment of 20%. So now the investor invests $20,000 and now borrows $80,000 from the bank. With just one rental property the investor has $100,000 working, that is, creating cash flow. If the investor does this four more times. That investor will have $500,000 working to bring in cash flow from the rental properties. This is the power of leveraging. And by using velocity banking to pay off these mortgages faster you can really start creating some cash flow in a few years. And once you pay off a mortgage. Repeat the process as desired.

Tax Deferred and Appreciation

Again, when you have access to larger pools of resources your chance of growth increases. Tax strategies that defer tax payments are more and more popular. And it’s a no-brainer, why!
Investing in real estate allows investors to start basically with other people’s money (OPM), e.g. banks, lenders, private lenders, etc. and grow a business in real estate without paying taxes. That is tax deferment. Because you are not taxed until the sale of the property.
However, there are several ways to sell a property without paying capital gain tax, e.g. 1031 exchange, charitable remainder trust, installment sales, etc. But the key concept in tax deferment is that you can continue to grow your investment in bigger and bigger chunks by pushing off the tax bill.
Appreciation is also very valuable. It is a way to continue to grow wealth without making deposits. Real estate overall constantly and consistently increases over time. In 2018, home prices increase by 8 percent, all the while, the U.S. inflation rate hit 2.9 percent in June, and the average U.S. savings account rate maintained at .06 percent. In reality, you lose money if you keep it in the bank. But one of the best ways to fight against inflation is to own real estate property. Although, there are potential dips in the market, e.g. the crash of 2007 overall the real estate market consistently and steadily appreciates over time. And if you think long-term investment, you are thinking bigger.

Tax-Free Cash Flow

Perhaps one of my favorite reasons to buy rental property. And just having one rental property you can gain all the benefits and write-offs that business get. Why? Because it is a business. Investing in real estate rentals allows you to make a bunch of write-offs that you normally couldn’t as a W-2 employee or other investment strategies. Sounds exciting! In other words, if you set up a legal business entity, e.g. LLC, S-Corp, etc. And your business entity owns your rental. You can write-off your property taxes, depreciation, mortgage interest, maintenance, travel, dining, home office, laptops, cell phones, etc. Which will allow the books to appear that you are losing money even though you are creating more cash flow? Interesting! You bet!

Small Business Tax Benefits

Again, having just one rental property allows you to go into business and treat your business as a business.
There are numerous tax advantages to going into business. And you don’t need to start off with any employees. You can always add them later if you want or as you grow your real estate empire. But my point is, with just one rental property you now have access to this wide area of tax write-offs. As you track all your related expenses to your property, e.g. maintenance, travel, dining, internet, home office, laptops, cell phones, etc. you can enjoy losing money on paper but limiting your tax liability, that is, you pay fewer taxes.
As I mentioned before on building tax-free cash flow. When you combine your personal tax returns and your business entity flows into the tax returns you are able to deduct off your personal income.
Also, more opportunity can open up for you when you treat your rental as a business. Banks and lenders will start seeing you as a business and will treat you like one, thus, allowing more access to capital.

Retirement Plan

Lastly, our of all the reasons to buy rental property. Rental properties are an excellent way to build up a retirement plan. Rental properties actually force you to save. You become emotionally attached to the properties that force you to keep the properties and always paying down the mortgage and building equity, at least until the entire note is fully paid.
And if you do it correctly, you gain all the tax advantages and benefits of a small business all at the same time you have your tenants pay you to do it.
Some employees may match your 401k contribution or pay a percentage of what you pay for it. But investing in rental properties there really are no contributions that you have to make after the initial investment. And as you build up your reserve account for emergencies, maintenance, etc. Most of this can be a tax write off.

Conclusion

Owning real estate as rental properties really do correlate to financial freedom. If you strategically consider your options creating the best scenario for growth by leveraging, creating business entities, controlling cash flow and taking advantage of tax benefits your retirement plan will bloom much more faster than other investment strategies.

This page may contain affiliate links. This website may contain content that comes from Amazon. This website and its pages are not intended to constitute legal, financial, or tax advice. The information on this website and its pages are not intended to constitute investment advice and all content are the views and opinions of the author(s), contributors, or administrators. Please read our disclaimer for more info.

Hi. My Name is

James Gheen

Welcome to the Bigger Investing website. I’m here to help you find the resources, motivation, and guidance for all entrepreneurial, investing, business, career endeavors, and more, so that you can invest in what’s most important. Your mind!

My focus is to equip you with expert sources, books, guides, articles, and more to help you achieve your personal goals.

Want to learn more? Take a look.

getabstract ad


Read in Graphics

Rich Dad Summit Ad

What Makes a Lifestyle Sustainable?

What Makes a Lifestyle Sustainable?

‍s the world enters its sixth mass extinction, it is more important than ever to develop sustainable solutions to reduce our collective impact. The Sustainable Development Goals (SDGs) are a globally accepted framework to guide sustainable...

Why Do Companies Greenwash?

Why Do Companies Greenwash?

‍he concept of a sustainable lifestyle is all the rage these days. Virtually every article, blog post, and news story you’ll read about sustainable living inevitably touches on the topic of sustainability. And with good reason. A...

What Do You Call Someone Who is Eco-Friendly?

What Do You Call Someone Who is Eco-Friendly?

his is a term you've probably heard before. It seems like everyone is talking about being eco-friendly now. And with good reason. The world is in bad shape. Just look at any of the natural disasters that have struck the planet in recent months....

Is Eco-Friendly?

Is Eco-Friendly?

he past few years have witnessed a sea change in the global consciousness about the environment. People are now more conscious of the impact of their actions and choices on the environment. At the same time, the green movement has also become a...

Why is Going Green So Expensive?

Why is Going Green So Expensive?

‍‍here’s a reason why the most popular way to go green is not to drive a hybrid car, buy solar panels, or eat organic food. It’s because going green is expensive. It costs money. A lot of it. In many cases, it’s more expensive than...

What are the 17 Sustainable Development?

What are the 17 Sustainable Development?

‍he UN’s ‘Sustainable Development Goals (SDGs) are a global initiative that seeks to help achieve the United Nations’ Agenda 2030 by setting out a plan of action to end poverty and end all forms of discrimination. They were launched at the...

What are the 3 Pillars of Sustainable Development?

What are the 3 Pillars of Sustainable Development?

ustainable development is a broad concept that can apply to many different things. It can mean different things to different people. Lately, it has become a buzzword. What does it mean, and how can you implement sustainable development in your own...

Which country is the Least Environmentally Friendly?

Which country is the Least Environmentally Friendly?

ou might assume that the most environmentally friendly country in the world is somewhere in the Nordics, with their love of clean air and water, and their progressive policies to protect the natural world. But you’d be wrong. In fact, the country...

Do You Need to Be Rich to Be Sustainable?

Do You Need to Be Rich to Be Sustainable?

ustainability is a critical component of any organization. Organizations of all types are striving for sustainability to ensure they have long-term viability and are able to continue operating for the long term. There are a number of ways to...

What Is The Biggest Obstacle To Sustainability?

What Is The Biggest Obstacle To Sustainability?

here are so many challenges in the world of sustainability and environmentalism. It can be frustrating and feel like a never-ending process. However, there are also so many amazing opportunities and places to look for inspiration. When you look...

What is the Main Aim of Agenda 2030?

What is the Main Aim of Agenda 2030?

he 2030 Agenda for Sustainable Development was launched in September 2016 by UN member states as a ten-year plan to end poverty and protect the environment by 2030. The 2030 Agenda is a universal plan of action for the next fifteen years, with...

What are the 3 Pillars of Sustainability?

What are the 3 Pillars of Sustainability?

n its most basic sense, sustainability is the ability of an ecosystem to continue to produce the goods and services it provides year after year. In other words, sustainability is about ensuring that the earth’s natural resources — such as soil,...

What are the 5 Components of Sustainable Development?

What are the 5 Components of Sustainable Development?

he term sustainable development has been making its way into the general consciousness of the world over the past few years, and for good reason. It’s not every day that a new concept is introduced into the sphere of social, environmental, or...

Where Can I Read Sustainability?

Where Can I Read Sustainability?

nterest in sustainability is higher than ever. That’s because it is becoming a more common topic of conversation. More people are joining the movement to live more sustainable, green lifestyles. With this increase in interest, you can find almost...

What are 4 Types of Sustainable Development?

What are 4 Types of Sustainable Development?

‍ustainability is the practice of delivering services and goods without compromising the environment or future generations. Sustainable development is an umbrella term that encompasses many different types of sustainable practices. With...

What Does Sustainability Mean to You?

What Does Sustainability Mean to You?

nderstanding the world around us is essential if we want to live responsibly and positively impact it. The first step is to understand what sustainability means to you. This means that if we want to make changes in order to better protect our data...

What are the 3 Principles of Sustainability?

What are the 3 Principles of Sustainability?

ustainability, also known as sustainable development, is a philosophy that encompasses all of society's activities in an attempt to maintain the environment. It's about reducing waste and conserving resources so that the planet can continue to...

What Does Sustainable Living Look Like?

What Does Sustainable Living Look Like?

t’s a term often used to describe ways of life that are based on the principles of ecology, social justice, and community. There are many different sustainable living practices out there, and it can be hard to decide which is right for you. Here,...

Why is Sustainable Living Important?

Why is Sustainable Living Important?

ccording to the U.S. Environmental Protection Agency, sustainability is the ability to provide for the needs and wants of current and future generations. Living sustainably is a concept that’s gaining more and more popularity and acceptance across...

What does it Mean to be Living Sustainably?

What does it Mean to be Living Sustainably?

iving sustainably doesn't have to mean huge, life-changing decisions. It's more about what you eat, what kind of toiletries you use, and how you waste your time. All those things are important to you, and they have a big impact on your life and...

What Are Some Examples of Sustainable Living?

What Are Some Examples of Sustainable Living?

he term “sustainable living” is commonly used in the media. It’s a buzzword that has been adopted by many companies and organizations who are looking for ways to save money and still maintain a high quality of life. The idea of sustainable living...

What are the Steps in the System Selection Process?

What are the Steps in the System Selection Process?

hether you need a commercially packaged warehouse management system, a point of sale system, an inventory control system, or a direct-to-customer order management system, selecting the right system is a major undertaking. Best Books on Systems and...

What are the 4 types of Strategies Under Strategic Analysis?

What are the 4 types of Strategies Under Strategic Analysis?

s a business owner, you know that you need to make strategic decisions in order to succeed. But how do you know what type of decisions to make? And how do you determine the best strategy for your business? There are four types of strategies—and...

What are System Planning and Initial Investigation?

What are System Planning and Initial Investigation?

n the system planning and initial investigation, the main objective is to identify the most important requirements for the system. It is an important step to identify the relevant system requirements for the system as a whole, for the subsystems,...

What is Planning in System Development?

What is Planning in System Development?

lanning in system development is the process of designing, planning, and testing a software system. It can be used to develop automotive systems, healthcare systems, social networking platforms, and other digital systems. The goal is to create a...

What is a Strategic Planning System?

What is a Strategic Planning System?

 strategic planning system is a tool used by business owners and managers to plan, manage, and monitor their businesses. A SPS helps you understand your business and its potential threats, opportunities, and performance. It also helps you choose...

What are the Three Types of Planning?

What are the Three Types of Planning?

lanning is the process of designing, plotting, and executing an action or event to achieve the desired outcome. The three types of planning are: strategic, tactical, and operational. Tactical planning is an overarching plan that defines the...

What are the 4 types of Planning?

What are the 4 types of Planning?

he first step to business success is to decide how to define success for the company. In many cases, businesses aren't clear on what exactly they want to achieve, and this can lead to confusion as well as frustration when goals are not met....

What do you Mean Planning?

What do you Mean Planning?

lanning is all about decisions. There are lots of them, they happen every day, and each one has the potential to affect the future in some way. We should be good at making good decisions and we can't always be good at that. Planning helps us get...

What are Some Types of Systems?

What are Some Types of Systems?

 system is a collection of parts that work together to achieve a common goal. Systems can be physical or open, probabilistic or deterministic, and man-made or natural systems. Best Books on Systems and Planning What is a system? The term ‘system’...