This is a quick video on the four ways that you can make money off of one real estate property. This is super cool, and to me, it shows exactly why real estate is the best investment that you can make in growing your wealth, especially when you're in your 20s and 30s.
So, Four ways to make money off of one property:
Now cashflow is super important to some investors, not as important to others, not a topic for this post, but basically, you want your property to cashflow. You don't want your property to be bleeding money every month.
The income from your rent should exceed the expenses coming out of your property every month, and that's your cashflow. Now some people invest solely for that. Some people don't really factor it in at all. It's really up to, but know just that's one way to make money off of your real estate investment.
Appreciation can be huge. This can be the fastest way to grow your wealth. If you buy in an area that just takes off in terms of value, your returns on your investment and your down payment are going to be massive. However, the thing about appreciation is that we can't control it. It's the market. We can't really control if the market's going to go up or the market's going to go down. We know that the market does have ups and downs, and as much as it could be great for your returns on the upswing, it could do the opposite for the downswing. But we also know that over time, as long as you can ride that out, any downturn in the market, and stick with your investments and hold on and make sure that they're rented out, then holding your property over a long period of time, you will see appreciation in value. When it's averaged out, it's about 3% a year, and that takes into consideration the ups and the downs, and that's a huge, huge way to grow your wealth is through even just a conservative 3% a year appreciation.
The third way to profit from a real estate investment is the tax benefits of owning a property. I'm not going to go too far into that here because I'm not an accountant and there's different ways to structure a real estate deal. There are different areas and jurisdictions that have different rules in terms of taxes. Just know that there are a lot of tax benefits to owning an investment property, and you have to dig a little bit deeper and figure out what those things are.
This is my favourite way of making money on a real estate property. Now this one, it gets a little bit overlooked. I'm not sure why. Maybe it's not as exciting as appreciation or cashflow, but to me it's such a HUGE aspect that people overlook.
Every single month, your tenant's paying your mortgage as long as the property's rented. Every single month the tenant is paying for your mortgage payment. Your mortgage payment consist of two things. They consist of interest and they consist of principal pay down. The interest is the cost of borrowing the money, so that goes to the lender that you used, and then the principal is being paid down each and every single month by your tenant is being added to your net worth.
So every single month, no matter what happens in the market, no matter what happens with any kind of unforeseen expenses or repairs that come up that are eating into your cashflow potentially, you have a tenant paying down your mortgage every single month, and that's adding to your wealth, and to me, that is so huge. No matter what happens, no matter where I am, no matter what I'm doing, if I'm traveling, I'm working, I'm with friends and family, doesn't matter. Every single month, that is being added to my net worth, and I love that.
Cashflow, appreciation, tax benefits, principal pay down, those are four reasons why I personally think real estate is the best investment you can make to grow your wealth exponentially.