There are truly many advantages of
investing in Prescott Arizona real estate. More millionaires have made their
fortunes in real estate than anything else! Here is what some of the
wealthiest Americans have said:
- “Real estate is the basis for all wealth.”
-Theodore Roosevelt
- “Buying real estate is the best, safest way
to become wealthy.” -Marshall Fields
- “90% of all millionaires made it through real
estate.” -Andrew Carnegie
Let’s look at some of the advantages in more
detail:
1. APPRECIATION - Over the past 80 years, Prescott
real estate values have continually increased. There have, of course, been
some periods where values decreased, but the overall trend has been
nothing but up. Like anything else, the value of real estate is determined
by supply and demand.
So what are the factors that have made Prescott
real estate in such high demand over the years? One of the main reasons is
that shelter is a basic human need. People need places to live, work, and
shop where they aren’t exposed to the weather. In periods of high
inflation, real estate values go up. Real estate is an investment that
benefits from inflation.
2. LEVERAGE - A great thing about Prescott real
estate is that you can tie up a big asset with a relatively small amount
of money. You can easily buy a $100,000 home with only 10% ($10,000) down
payment. To illustrate the power of this, consider this example:
Suppose you bought $10,000 worth of gold, mutual
funds, or some other investment. Let’s say that it goes up 10% for the
year- not bad. Your investment is now worth $11,000. So your return
is 10% of $10,000 = $1,000. Now lets suppose that you take that same
$10,000 and put it as a down payment and buy a $100,000 house. Again, let’s
say that it goes up 10% for the year. Your property is now worth $110,000!
Your $10,000 investment increased by $10,000. That
is a 100% return on your money (not even considering the equity build-up
resulting from the constantly decreasing mortgage, cash flow, or tax
advantages)!
3. TAX ADVANTAGES - You can deduct, as an expense,
all of the interest, property taxes, insurance, repairs, inspections, and
depreciation on your investment real estate- no matter how much you own.
Do not confuse this with the rule for personal residences. While you can
only deduct interest on up to 2 personal residences, you can write off
unlimited investment interest.
The IRS also allows you to take a paper write off
(depreciation). You can depreciate the structure (not the land) as if it
would be worth nothing at the end of 27.5 years! Of course we all know
that the property will probably be worth much, much more in 27.5 years
than it is now -not less. Nevertheless, on a 100,000 house (assuming, for
example sake, the structure is worth 80% of the total) we are allowed to
write off nearly $3,000 in depreciation alone each year!
4. FREEDOM - While there is some management and
record keeping required, it is nothing compared with some other
investments. If you invested in a business such as a dry cleaners or a
restaurant, you would be married to the place, putting in God knows how
many hours. Real estate investing can be done without too much
interference with your current job.
5. SOMEONE ELSE PAYS FOR IT - With Prescott
real estate, the people who occupy your
buildings are called tenants. They pay you rent every month
that you then use to pay the mortgage. The tenants literally buy your
investment property for you! When you invest in stocks, bonds, or precious
metals, you are the one who has to pay for it.
6. CASH FLOW - Real estate provides you with a
monthly cash flow. This can be some very significant income,
especially after the loan is paid off!
7. SOLID ASSET - Real estate is widely recognized
as one of the greatest assets to have. It is looked upon favorably by
anyone looking at your financial statements. Real estate is also easy to
borrow against should you need extra capital.
Once you understand all of the advantages of
investing in real estate, it is easy to see that very few, if any, other
investments can match real estate. No wonder it is the favorite of
millionaires! If you want to be successful, do what the most successful
people are doing… INVEST IN REAL ESTATE!
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