I personally believe buying and holding real estate for the long term is one of the most effective wealth building strategies available to the general population.
Here are my reasons why:
Despite the recent real estate crash, when you look at real estate over the long haul, it’s accurate to assume some level of appreciation in your real estate holdings. Yes, there are market cycles where values rise quickly or fall quickly, but by and large, real estate is an asset class that appreciates. In addition to this, investors have the ability to research market dynamics and make fairly knowledgeable decisions based on anticipated appreciation for a particular market.
Principle Paydown –
A commonly overlooked benefit of investing in real estate is the fact that while your tenant may provide you with positive cash flow above and beyond your mortgage payment, they are also helping to pay down the mortgage as well. While the principle portion of the mortgage payment is minimal at first, every year that you own the property the amortization of the principle amount of your loan speeds up. Before long, you are shaving thousands of dollars off of your loan amount every year until ultimately you own the property outright.
Increasing Rents –
Very few would speculate that housing rents will decrease over time. Most analysts have already stated that rents are expected to increase over the coming years. Owning real estate not only allows you to lock in housing prices and interest rates that are at all-time lows, it also provides you with the an opportunity to increase future cash flows by increasing rents … thus increasing your ROI in future years.
Retirement Income –
For those investors that look at real estate investing as a very long term proposition, the potential to retire on rental income is very real. I know many investors that have owned real estate for multiple decades as a retirement strategy and ended up very wealthy as a result. Over a 20-30 year period of time, investors can own numerous properties outright and create a net worth well into the millions. Additionally, the cash-flow that can be generated from properties that no longer have mortgages can be very nice supplements to pensions, 401Ks, social security, etc.
Tax Benefits –
As taxpayers in a tightening tax system, any kind of deduction can be helpful. Owning real estate allows for the deduction of mortgage insurance as well as the depreciation of the property itself. In addition to this, real estate can also afford you the opportunity to defer tax liability by using 1031 exchanges to continue investing funds in new properties while deferring tax liability indefinitely.
For investing Real Estate in Surrey, North Delta, Langley, Greater Vancouver and Fraser Valley give me a call at 604-518-9000 or visit www.bchousefinder.com