There are four different ways to make money in real estate:
- Cash Flow
- Tax Benefits
- Principal Reduction
Can you think of another investment where you can derive four separate benefits?
Real Estate Investment Cash Flow
The amount of money available to the investor from rents and other income after operational expenses are paid constitutes your real estate investment cash flow.
This monthly, quarterly, or yearly distribution of income is cash in your pocket to be used as you see fit. I like to think of it as incremental return of my initial capital investment which reduces my risk exposure over time.
While working as a physician, I universally reinvest these funds in new investments. Ultimately, when my cash flow exceeds my monthly living expenses, I can live on that cash flow and retire from medicine if I wish.
Real Estate Appreciation
With residential real estate, it can be difficult to count on any real estate appreciation. [Read more…]