Real Estate’s best-kept secret is no secret at all; that long-term ownership provides significant financial rewards. Why call this a secret? Because so few people take advantage of having income from real estate investments.
When you own real estate, even when expenses keep pace with rents, rent is paying down mortgage debt each month. This creates value in the property and wealth for the property owner. The primary driver of income from a property is rent, yes, but add to this appreciation, depreciation (with potential tax benefits) AND mortgage reduction. Direct investment into real estate deserves a look.
Buy and Hold…
The wealthiest real estate investors own the same assets they purchased ten years ago and twenty years ago. The SAME ASSETS. No bootstrapping into the latest and greatest over-leveraged deal, no trading up again and again. The assets purchased “back in the day” are by far their smallest deals… but they still own them. Why? Because they cash flow like crazy There is story after story of people telling me about the asset they wished they’d never sold; How now it’s worth ten times what they paid for it.
Why do they still own them? Because they cash flow like crazy!
The best way to own real estate today is to start small and build a portfolio over time with reasonable leverage and good professional property management. Once you own real estate- keep it. Savvy investors keep what works. Real estate works as part of a balanced investment portfolio.
There is a time to sell…
Certainly, there is a multitude of good reasons to sell real estate assets at some point; from capturing capital gains for reinvestment, estate planning, repositioning corporate or personal assets, re-balancing a portfolio or using of proceeds to pursue other investments.
An important precursor to selling owned real estate is the “thinking time” prior to making the sell decision. Think about the end game. What is the highest and best use of the money once the property is sold? If the intent is to purchase another property, hire good tax council “before the sale” to make sure you do it right and reduce possible tax liabilities.
Avoiding the sale of an asset strictly based on tax consideration is short-sighted. Tax considerations are just one part of being in business. Warren Buffet is famous for saying he will be pleased to take on an investment others pass up because they fear the big tax bill that comes with success.
Long-term real estate ownership is very profitable. Selecting the right markets and the right assets is an important part of the process of buying quality real estate. When done right consider that these same assets may be in your family for generations. And that’s how “the secret” is passed down to the next generation.
Start With a BIT™
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