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Investing Basics

The first is the most obvious, cash. Every month, someone will pay you cash above and beyond your expenses to live in the home you own. Many analyses end at this. Here at Foundation Realty, we see this view as short sided. There are many other benefits, and strategies that would benefit from them.
The second benefit is principal reduction. Through your tenant paying for your expenses, they are reducing the amount that you owe on the principal of your loan every month. This amount can be calculated through a simple amortization schedule, and is a factor that should be taken into account in any investment analysis.
The third benefit is tax savings. All investments have elements that can contribute to greater tax write-offs. Interest paid on your loan and depreciation are both examples of things that can be written off on taxes in order to reduce the taxable income associated with the investment. Since strategies vary, this savings will as well. Generally speaking, some level of additional taxes will be paid out because of an investment if it is a good one. Even though it usually makes an investment look slightly worse, it is something that needs to be taken into account.
The final benefit associated with real estate investing is appreciation. This figure has been seen as high as 5% in a year! This is an important benefit to take into account, but should not be relied on to make an investment a good one. If appreciation is the only thing that makes an investment good, it is not a good investment.