What are the 5 core benefits that make real estate a smart investment? On this mindset minutes episode we go into why investing in real estate is such an intelligent choice.
Maybe you want a tax break… maybe you’re looking for a passive income… or maybe you just want to make sure your retirement plan is more comfortable. If you're new to investing, or thinking of getting involved in investing, then you don't want to miss this episode full of free vital information.
KEY TAKEAWAYS
1. The 5 benefits of real estate investment are:
1. Monthly cash flow.
2. Equity growth.
3. Leverage.
4. Appreciation.
5. Huge tax benefits.
2. It's very difficult to find the same returns that you can receive from real estate in other markets.
3. You can opt for a safer investment or a more risky higher ROI investment. You can find a plan to suit your personal needs.
BOOKS
The Passive Investing Playbook - https://theinvestormindset.com/passive
LINKS
Learn more about investing with Steven at
https://theinvestormindset.com/invest
Title: E133: 5 Reasons Why Real Estate is the Smartest Investment - Steven Pasavento
Host: Steven Pesavento
Duration: 13:40
Narrator (00:00):
It’s wonderful that so many of you have stepped up and registered to partner in future multifamily opportunities together. We follow a very strict vetting process when selecting our operating partners and all of which have a serious track record, at least five years of experience, at least 2,500 doors that they've actually managed and owned. And over $250,000 of assets under management, these kinds of guidelines help make sure that we are investing together in some phenomenal deals. And you can learn more by registering at theinvestormindset.com/invest. These institutional silo investments bring benefits to busy professionals and real estate entrepreneurs looking to reduce their taxes and increase the returns. And you can join us by getting started at theinvestormindset.com/invest. I look forward to seeing you on the next deal.
This the investor mindset podcast and I'm Steven Pesavento for as long as I can remember, I've been obsessed with understanding how we can think better, how we can be better and how we can do better. And each episode, we explore lessons on motivation and mindset for the most successful real estate investors and entrepreneurs in the nation.
Steven 01:18):
Welcome back to another episode of the mindset minutes on the investor mindset podcast, and I'm your host, Steven Pesavento. And each week I share mindset tips and investing strategies to help you grow your business to a whole another level. This week we're focused on the five core benefits of real estate investing; the five reasons why real estate investing is one of the smartest investments that you can make. And so make sure that you join us each week, as we share more tips and strategies to help you reach true financial freedom through real estate and you can do that by hitting that subscribe button down below and make sure that you never miss another episode. If you've been listening to us for any amount of time, help us get this message out to more people by, by hitting that subscribe button. But most importantly, going and dropping us a five star review and tell us how much you love what we've been up to. So remember you can grab the full passive investing playbook, the ultimate guide on passive real estate investing by heading over to the investor mindset.com/passive and you can do that by jumping right over to the show notes or, or heading right down below and hitting that link and grab the guide over 10,000 words where we've dove in deep laying the foundation. So you can make smart decisions in your passive investing career to really build that financial freedom. So let's get into this episode
Regardless of if you've been investing for a long time, or you're just on the fence, thinking about it, trying to decide what direction you want to go in real estate, we've got five core benefits that make real estate, a smart investment, it's a core reason why I invest in real estate and why so many other people do as well. It's a core reason why over 90% of millionaires made their money in real estate. It's absolutely absolutely huge, right? So we're going to dive into these five core benefits, so make sure you get your notebook out. You're going to want to take some notes because at the end, I'm going to be encouraging you to make some decisions on what direction you want to go and how this can actually benefit you. T
The first one, it produces cash-flow, right? So the tenant pays you for the opportunity to live in the property or to rent that property and then you of course pay the expenses on that property. You pay down the debt, you pay for any expenses on managing it and the difference that you get to keep is your cash flow. The cash flow is the profit that's coming in every single month or every quarter or every year and cash-flow equals passive income and passive income equals, making money while you sleep. And honestly, there's not a lot of other places where you can buy an asset or run a business that's going to produce that kind of income for you, while you sleep. It's kicking off that dividend on a regular basis, something that you can rely on, or you can rely on even more when you're focusing on commercial real estate, when you're focusing on bigger assets that have a much more larger diversity of different tenant basis, and you can really spread out that diversity to make it even more of a secure investment, right?
So the next one is that real estate investing builds equity, right? So if we're going to go out and we're going to purchase a property and we're going to have our tenants pay down the mortgage, which we're going to get into that in just a second, wherever tenants paid down the mortgage, pay down the debt, we're actually going to be building equity in that property each time that tenant pays that check every single month, a portion of that is actually going to go towards that paydown, right? Some of it's going to go towards interest, which we're going to get some benefits from that as well. But that equity that we're building is going to end up being something that we can take and harvest at the end of the project, or maybe refinance out and be able to take that and move that into another property. So we're able to build a little bit of equity and so, you get a double dip on the upside of real estate investing because you're getting that cash-flow and you're getting that equity paydown, right?
So the next one, the next one is simple. We all know about it, but we all forget about it often, because we're able to use leverage to increase our returns. So if I was going to go buy a hundred thousand dollars property, but I'm probably not going to pay a hundred thousand dollars in cash, right? I'd probably put $25,000 down and you know, that would go towards the down payment and then the bank would partner with me and they'd bring the other 75, right? And all they want is, they want to make sure they can make their interest, the return, they're looking for a specific type of return, and they're happy to partner with you on the deal. And as a result, the cash flow that I was earning, the cashflow that I earned on that property is actually going to be a much higher return because of that leverage. Because I've got that leverage in place, I'm actually making the return on the 25,000 I invested instead of having to put in that whole hundred thousand. So it actually increases my returns. And, you know, if we go to that cash flow example and I bought a hundred thousand dollar property and I put down $2,500, but my mortgage is only 500 per month and that rent that I'm getting is a thousand, you know, after I pay the mortgage and let's say, my expenses and reserves are at 350, I'm making an extra $150 a month in cash flow, right? It's true mailbox money. But imagine we lever that up to talking about a $10 million building and that we're investing for a portion of that $10 million building. We're seeing those kinds of returns, very similar, maybe even much higher plus we're getting that benefit of economies of scale. It's one of the reasons we focus on commercial instead of single family, because we focus so much time there in the beginning, but when you're getting started in real estate, if you're gonna go that active route, single family is a great way because you're able to get that direct ownership really, really quickly.
So the fourth thing, the fourth big opportunity here in real estate is the potential for appreciation. So historic values of real estate. Typically they always keep going up over time, right? Some are faster in some markets and some are slower, but at the end of the day, typically properties appreciate and so whatever you bought the property for the value of your property could go up. And I say could, because I don't like to bank everything on appreciation. I like to invest for cash flow and benefit from some of that appreciation, but let's say it does go up. You know, it's nice to have. It's something that is really adding to my overall return and it leaves a nice little cherry on top. And sometimes that cherry on top can be bigger than all the ice cream that we've loaded into our Sunday in the very first place.
And so finally, but definitely, definitely a very important one is that they've got incredible tax benefits and advantages by investing in real estate, you know? The tax benefits are huge. You know, if you think about it, if you think about the tax code, it is like a treasure map that the government wrote for us to go out and find the treasurer. They've created an incentive program for us to do what they believe is beneficial, right? We can hate on taxes, or we can just decide to say, Hey, let's find the map in order to pay or reduce our tax liability. And so real estate is one of those places where the government says, hey, we want you to invest in real estate so we're going to give you some really great tax incentives, some benefits, and they are some of the highest real estate compared to many other places. And so we follow that treasure map, rebel the land at real estate and buy certain types of properties, especially multifamily, where we're able to produce housing, which is something the government believes and knows that is needed. And so we're able to get tax write offs, right? And so we get this benefit of depreciation, which, you know, we get a write off every single year. Maybe we get a large write off right at the beginning was something called bonus depreciation but it's that power of the paper loss that we're able to write off or reduce our, our current taxes that we're making elsewhere. So if we're making big passive income swings and other parts of our portfolio on other properties, we're able to actually reduce the taxes that we have to pay on that because of these paper losses. And for some folks, we're actually able to reduce our total income that we're making, right? We're able to reduce the income because we're able to have these write offs.
So these five core benefits make real estate investing one of the smartest investments that you can make, because when you're producing cash-flow, you're producing a regular income every single month when you're able to leverage that cash flow to increase your return, and you're able to build equity with every check that you receive from your tenants, and you're able to see a little bit of appreciation or potentially a lot of appreciation with that appreciation potential, and then you're able to write off sometimes huge amounts of money, reducing your tax bill, which also levers up returns and makes them even more strong. You're just not able to find these types of returns elsewhere. That's one of the real reasons that real estate is one of the smartest investments.
So what I want to ask you guys to do is jump over and shoot me a story on Instagram or Facebook or a LinkedIn message just saying, hey, Steven, I listened to this episode and I saw that those five benefits are really, really empowerful and share this episode with somebody else. If you find this as beneficial, then help somebody else that maybe doesn't know about these five benefits, pass it along to them. Because even if they don't make a change in their life today, even if they don't jump on the real estate bandwagon or start making these investments themselves, it's important for them to learn, right? If you love somebody enough that you're going to care about, what's going to happen in their future. You don't just pass this, pass this along. It's just a few minutes and they'll be able to start to realize like, Oh wow, maybe there's some stuff here that's worth learning about. And even if they don't learn about it today, maybe it plants the seed for 5, 10, 15, 20 years down the line, and it can make an impact then.
So I want to leave you guys as I always leave you with a reminder to take action, to head over to theinvestormindset.com/passive, grab the full guide where I dive deep into this and many other topics in The Passive Investing Playbook, the ultimate guide on passive real estate, investing over 10,000 words to really lay a phenomenal foundation for you to make smart decisions in your passive investing in real estate career. So I'll leave you as I always leave you. And that's with a reminder to live a life worth inspiring others, and you can do so today by going and applying this in your life, by going and figuring out well, where am I going to make some, some changes in my portfolio? How am I going to allocate money? How am I going to go learn a little bit more so that I feel confident and comfortable to go invest in smart conservative investments where I can start seeing some of these benefits and start building the confidence to go, you know, do it on my own, or to go do it with other partners. It's a phenomenal way, I know it'll change your life. It's changed mine. The power of growth combined with real estate equals the ability to grow the life of your dream.
So thank you guys so much as a reminder, if you haven't hit that subscribe button, wherever you happen to be listening, don't miss another episode. And if you love what we're doing, please help us reach more people. Please, please, please share this and go drop us a review on your favorite platform, whatever that review happens to be, you know, always here to receive feedback and to serve. So love you guys, thank you so much and we'll see you on the next step.
Narrator (13:12):
Thank you for listening to the investor mindset podcast. If you like, what you heard, make sure to rate, review, subscribe, and share with a friend, head over to theinvestormindset.com to join the insider club, where we share tools and strategies from the top investors and entrepreneurs and how to take it to the next level.