What You Must Know About Investment Real Estate

End-users, along with investors are in high need of real estate. This makes it among the most profitable businesses in the world.

Potential buyers have found the city attractive because of its many job opportunities. Dealing with the best investment real estate consultant is a fact of life when purchasing real estate for investments.

Image Source: Google

There are four elements of return associated with investment property. They are:

1. Cash Flow

The formula for cash flow is rental income minus operating expenses. Operating expenses include mortgage payments, property taxes, insurance, utilities, upgrades, and repairs. 

Usually, investors who require significant cash flow will significantly decrease their profit in the other three elements of return.

2. Equity Growth by Amortization

This occurs as the principle is deducted from your mortgage loan balance. Typically, mortgage payments are the same each month and are paid by the rental income. 

These payments usually cover both principal and interest. As you make payments, you pay off the principal which increases your equity.

3. Equity Growth by Value Appreciation

When properties increase in value, you gain equity. There are two kinds of appreciation: (1) inflationary and (2) demand. 

Inflationary appreciation is the increase in property value due to the reduced purchasing power of the dollar. Demand appreciation is the increase in property value due to the limited supply of property.

4. Tax Shelter Benefits

By selecting a property with high tax shelter benefits, investors can significantly reduce their federal and state tax liability.