Real Estate Investing

Real Estate investing is also a very popular vehicle for investing. Real estate investing provides several ways to make money:

• Appreciation - this is the difference between the price you paid for the property and the price you get when you sell.


• Depreciation - The non technical definition of depreciation is the amortized value of the non land value of your property. Property requires maintenence, so you are able to depreciate (one thing to be careful of here is that your income deteremines how much depreciation you can claim on your taxes) the structure over the amortization schedule. The value you get from depreciation is deducted from your taxes (so you can get the value*tax rate) so you can realize this before you sell, but when you sell the depreciation taken is added on to the basis.


• Rent - The expense of maintaining investement properties can be offset by rental income. If the rental income exceeds your monthly expenses, then this is referred to a cash value property and you will have income from this property.


• Equity - this is the amortized portion of your debt service. The equity you build is your money, once the loan is paid off or a cash out refinancing occurs

Real Estate is a somewhat more hands on investement as you actually own the property and have to be more involved than in equities where you need to just write a check.