If you look at a list of the World's Richest People as compiled by any number of organizations such as the US "Forbes 400 Richest Americans", and look at where each of these individuals have built their wealth, you will see that an overwhelming percentage are real estate investors. While these people have generated money from varied fields of businesses and professions, one stands head and shoulders above the rest - Investment Real Estate.

 

And for those that haven't generated their wealth directly from real estate investing, many of them have used real estate as a secure and solid asset to funnel and further grow their fortunes. It is also the number one vehicle for more rags to riches stories than any other means. 

So what makes real estate stand out above all the other asset classes as the vehicle of choice for wealth creation?

Leverage - You can purchase and control a sizable asset with very little or none of your own money down. You will get the positive cash flow and the appreciation on the entire asset - not just what you put into the property. For example, if you purchase a $300,000 investment property with only $30,000 of your own money and it appreciates 7% per year for two years, the property value after two years will be $343,470 giving you a return of 145% in only two years holding time. If you purchase the same or similar property with only $5,000 of your own money, your return would be a quite respectable 869%! 

 

Be in Control - You can purchase an investment property, make minor rehabs to it, and sell it at an enormous profit. You can find a good deal priced below market value and sell it for an enormous profit. How long would you have to work at your job to net thirty, sixty, a hundred thousand dollars - after taxes? You can take money out of the property by borrowing against the asset and pay no taxes. You can exchange (1031 exchange) the property for another and pay no taxes. You are in control - not some double-talking corporate CEO who is cooking the books while hyping a worthless Wall Street stock and certainly not a begrudging boss who would like nothing better than to find someone else to do your job cheaper or eliminate it completely, and definitely not the personnel director who stayed up late last night typing out pink slips. 

 

Market Appreciation - This is a fact of real estate. They aren't making any more land. The population keeps growing. Everyone needs a roof over their head. Real estate appreciates in value without you having to do anything to it. It just keeps getting more and more valuable demanding a higher and higher price tag. Year to year appreciation is difficult to predict. Prices do go down at times, but if you look at the market appreciation of real estate over time, the direction is up - usually to the tune of five percent per year and more. 

 

Liberal Financing - Banks (as well as the Federal and State governments) want to lend you money to own real estate. Try buying a stock with no money down or even ten percent down. No way. 

 

Cash Flow - Tenants pay the mortgage. Rents go up. You get a steady passive income stream. You get 100% of the property appreciation.

Tax Incentives - You can deduct expenses from your taxes, including mortgage payments and property taxes. You can deduct depreciation from your taxes. You can profit up to $250,000 (single) or $500,000 (couple) every two years tax free in real estate. You can start a real estate IRA paying no taxes on the profits of your investments until you retire and start taking the money out. You can pass real estate to your heirs tax free. There are actually too many tax incentives to list so I'll stop here.

When you invest in real estate, you will be creating a snowball effect of wealth generation. One profitable deal leads to another and bigger deal. A positive cash flow from one building finances the purchase of another and so on. But before you purchase properties, you must scout and investigate deals. You must have deals and opportunities placed before you to analyze before you can act.

"Destiny is not a matter of chance, but of choice," unknown author.

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