When it comes to real estate, investors need to make a sensible decision with their money. They need to ensure that their investment grows over time in order to earn interest on capital. According to Sam Alexandre Zormati Investing in real estate is similar to building a nest egg for the future. This interest on your capital is helpful in supporting yourself and your family.
For investors, there are plenty of different investment options out there, including IRAs, stock market and much more. In parallel, there are some compelling reasons that prove real estate investment will be the smart one.
Sam Alexandre Zormati share below those reason. Let’s take a closer look.
Regular Cash Flow
One of the utmost benefits of lucrative real estate investment is the revenue generated from leasing. Leasing also secures the assets. This benefits in a regular income stream which is significantly higher than other stock dividend yields.
Multiple Asset Value
Another major advantage of commercial real estate investing share by Sam Alexandre Zormati – is the ability to increase debt, which is several times the original equity. This allows you to buy more assets with less money and significantly multiply the asset value and increase equity as the loans are paid down.
Multiple Cash Flow
Placing “positive leverage” on an asset enable investors to effectively increase cash flow from operations by borrowing money at a lower cost than the property pays out.
For instance, if a property generating a 6 percent cash-on-cash return. Where the debt placed on it at 4 percent, the investors would be paid 6 percent on the equity portion and approximately 2 percent of the money borrowed, thereby leveraging debt.
Real estate owner also has tax benefits, offered by the US Tax Code. Unlimited mortgage interest deductions and depreciation accelerations shield a portion of the positive cash flow and paid out to investors.
While selling, the IRS allows investors a 1031 provision, enabling investors to exchange into a like-kind instrument and defer all taxable gains in the future.
Hedge on Inflation
For each generated revenue, there is a corresponding liability. Since real estate investments have shown the highest correlation to inflation when compared to other asset classes i.e. S&P 500, 10-year Treasury notes and corporate bonds.
As the nation continue to print money to spur economic growth, it is important to recognize income producing options that act as a hedge against inflation.
Generally, when inflation occurs – the price of real estate, particularly multi-tenant assets that have a high ratio of labor and replacement costs, will also rise.
Capitalize On The Physical Assets
As Sam Zormati said, “Real estate is one of the few investment classes that is a hard asset but has meaningful value”. The property’s land has value – as does the structure itself, and the revenue it generates has value to future investors. Real estate i nvestments doesn’t incorporate red and green days, as the stock market does. This is another major advantage of this investment.