So, you think real estate investments are just for rich couples or singletons who can take risks because they don’t have hungry mouths to feed? Think again. Because contrary to popular belief, it doesn’t matter how much money you have. In fact, most successful real estate investors, male or female, started very small. And that’s honestly for the best, because there’s a lot to learn and lots of mistakes to be made—the smaller the investment, generally the less costly the mistake.
First, when referring to real estate, we are talking about rental real estate that produces a positive cash flow. Your goal is to collect monthly rent for profit—and any gain in value of the property itself is a bonus. This long-term play is much more steady and much less risky than the pundits want investors to believe.
Second, it’s important not to be limited in your terminology. When I say real estate rental properties, I’m talking about single family houses, duplexes, triplexes, apartment buildings, single office buildings, multiple office buildings, retail stores, retail shopping centers, big box stores, self storage facilities, industrial warehouses, and so on. As you can see, there is a ton of variety in real estate.
So, with this in mind, what’s in real estate investing for busy Dad’s? Real estate is a particularly great investment opportunity for families (including dad’s). Here are 5 reasons why I think real estate investing is particularly great for busy Dad’s:
- Cash Flow and Passive Income
One of the best benefits of real estate investing is that it can save you from the “Feast or Famine” cycle that investors often face in other entrepreneur endeavors.
Provided you invest well, your real estate investments can provide passive cash flow from day one. In other words, after you deduct expenses from the income from your tenants, you have profits that you get to keep. And it’s mostly passive income (i.e., you don’t have to work for it – the money just comes to you). So while you work your other business, your real estate investments can provide you with a second stream of income.
- Life-style Friendly Business
Passive income means that while you are making money through real estate investments, your time is freed up for you to spend more time with your family, travel, etc.
Property values aren’t always rising, but over the long term all real estate values tend to rise or appreciate. This means that in addition to the cash flow, your net worth is also increasing as the value of your properties increase. This is helpful for you and can be a vital part of leaving a legacy for your children.
- Tax Benefits
The federal government decided that they wanted to promote property ownership, so there are all sorts of tax benefits in the tax code for doing so. First, unlike other businesses you might own as an entrepreneur, rental cash flow is not subject to self-employment tax. In other words, if you make $50,000 in rental income in a year or $50,000 with an Etsy business, you’ll pay less taxes on the rental income.
Another way to keep more of your cash flow is through something called depreciation. It allows you to deduct a portion of the property value from income and pay less taxes. In some cases, even though you’re getting income from your investment property, your property will reduce your overall tax burden (so you’re paying less taxes on all your income – not just on your income that you receive from the property).
- Leave a Legacy
Real estate investment allows you to leave a legacy for your kids. Not only can your children inherit your rental property that will likely increase in value and set them up for a profitable life, but you are also showing them something very important about wealth.
Most kids are taught that they have to trade their time for money. Through your careful investments and wonderful example, you will show them that they can have enough investments so that they never need to work at a job they dislike. They will be ok with their passive income and hence financially free.
For these five reasons and more, real estate investing is must for Dad’s.