What are the 5 core benefits that make real estate a smart investment? In this 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.
What are the 5 core benefits that make real estate a smart investment? In this 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
Resources Mentioned
The Passive Investing Playbook - https://theinvestormindset.com/passive
Learn more about investing with Steven at https://theinvestormindset.com/invest
Steven Pesavento 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 2500 doors that they've actually managed and owned over $250,000 of assets under management. These kind of guidelines help make sure that we are investing together in some phenomenal, phenomenal deals. And you can learn more by registering at the investor mindset.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 the investor mindset.com/invest. I look forward to seeing you on the next deal.
IM Intro/Outro 00:56
This is 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 Pesavento 01:18
Welcome back to another episode of the mindset minutes on the Investor Mindset podcast. And I'm your host, Stephen Pesavento. And each week I share mindset tips and investing strategies to help you grow your business to a whole nother level. And 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 to drop 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.
Steven Pesavento 02:47
So 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 gonna 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. So 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 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 is the profit that's coming in every single month or every quarter 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, 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 bases. And you can really spread out that diversity to make it even more of a secure investment. Right.
Steven Pesavento 04:28
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 gonna have our tenants pay down the mortgage, which we're going to get into that in just a second. Whenever tenants pay 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 pay down. 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 pay down. Right.
Steven Pesavento 05:22
So the next one, the next one is simple we all know about it, we all forget about it often is that we're able to use leverage to increase our returns. So if I was going to go buy $100,000 property, but I'm probably not going to pay $100,000 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, their 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 cash flow that I earn 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, you know, the return on the 25,000 I invested instead of having to put in that whole 100,000. So it actually increases my returns. And you know, if we go to that cash flow example, and I put in 100,000, or I sorry, I bought $100,000 property, and I put down $2,500, but my mortgage is only 500 per month, and that rent that I'm getting is 1000. You know, after I pay, you know, 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 kind 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, you know, in the beginning, but when you're getting started in real estate, 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.
Steven Pesavento 07:16
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 a 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 that we've loaded into our Sunday in the very first place.
Steven Pesavento 08:07
And so finally, but definitely, definitely a very, 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, if you think about the tax code is like a treasure map that the government wrote, for us to go out and find the treasure, 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 in real estate compared to many other places. And so we follow that treasure map, we're able to land at real estate and buying 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, or maybe we get a large write off right at the beginning with 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 this, 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.
Steven Pesavento 09:57
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 leverages 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 LinkedIn LinkedIn message, just saying, hey, Steven, I listened to this episode. And I saw that those five benefits are really, really powerful. And share this episode with somebody else. If you find this as beneficial than 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?
Steven Pesavento 11:16
If you love somebody enough, that you're going to care about what's going to happen in their future, you know, 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 510 1520 years down the line. And they 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 the investor mindset calm slash 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 really lay a phenomenal foundation for you to make smart decisions in your passive investing and 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 dreams. 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. We'll see you on the next episode.
IM Intro/Outro 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 the investormindset.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.