By: Vidit


Intro

This document offers a small intro to RE investing. It answers three questions:

The good and not-so-good of Real Estate

RE has a few interesting benefits:

  1. The biggest benefit is consistent cash flow.

    Eg - Buy cost = $100,000,

    Rent = $1,000,

    Mortgage = $400

    All expenses = $400.

    Then cash flow per month is $1,000-$400-$400 = $200. If you paid $24,000 initially for a total downpayment.

    Your cash return alone is ($200 x 12)/$24,000 = 10% 😳.

  2. Principal Paydown

    Part of the mortgage will go toward interest

    But part of it will build equity as the principal gets paid

    For me, that's about 10% on my current portfolio, and it increases every year as more of the payment counts toward the principal.

  3. Asset Appreciation

    This one is self-explanatory.

    If you buy in the right market, this is the cherry on the top

    I never bet on it, but I buy in markets that have grown 11% YOY

    If I sell now, I will make a ~ 30% annual return on my initial investment, including appreciation

  4. Tax breaks

    You don't pay taxes on the rental income via concepts like depreciation, cost segregation.

    You can also leverage write-offs through the partnership LLC

    When you sell, you can apply the 1031 exchange concept and even defer any capital gain taxes.