Demystifying Real Estate Investing

During a recent chat about real estate investing with a friend, I realized that some of the things are not too clear to a lot of people.

Real estate buying and investing has many layers of complexity. When comparing renting versus buying, the first instinct is to compare the total rent versus total mortgage payment. But there’s more to consider:

1. Property Appreciation: If you invest $100,000 down payment on a $500,000 house, and the property appreciates around 4% per year on average, your annual return via appreciation is $20,000, a healthy 20% returns per year! Veterans and first time home buyers can buy the same property with as little as $25,000 down, which means annual returns will be crazy good.

2. Principal Payment: The principal in the monthly mortgage payment is basically you paying your future self by building equity in the property.

3. Interest & Tax Deduction: For high earners, interest and property taxes can help lower income tax by increasing deductions.

4. Depreciation: For investment property, depreciation can offset a large portion of the rental income. Thus reducing tax liability.

5. Fixed Housing Cost: While rents keep rising at around 5%-10% every year, a fixed-rate mortgage freezes your housing expenses, kinda forever.

Xillion’s home buying guide lets you plug in the numbers and see for yourself if it makes sense for you to invest in real estate or not. Or which property to buy among many. Or on what terms of interest rate, down payment etc. Buying a home is a financial and emotional decision. With Xillion's home buying guide, the financial decision making will become the easy part.

Xillion mentors specializing in real estate are able to generate mouth watering double digit returns per year. Sign up for Xillion today to get expert guidance from these mentors.

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** Average returns in real estate in the US have been around 3.8% per year. One downside of real estate investing is that the gains are less liquid than say stocks or bonds. Real estate is great for you if your goal is to build wealth for the long term. Source: How Much Do Homes Increase in Value in 10 Years?

Standard deduction for a married couple is much higher after the 2017 tax changes, making this tax offset a bit less effective.

Author: Gagan