When planning to invest, many people find themselves in a dilemma – real estate or stocks? While both of these options are great ways to multiply your capital, investing in real estate is far more rewarding for the following reasons:

Investing in real estate offers the investor more control over his or her investment. One of the disadvantages of investing in stocks or bonds is the limited amount of control that you have over the potential return on your investment.

Real estate offers the safety that stocks cannot offer. When housing prices go up, many renters are priced out of the market and are forced to rent rather than to buy. In this scenario, your investment is protected by the property’s income and in return, your property value may rise. You can hold on to the property, allowing it to gain equity while simultaneously generating income by renting it out.

Investors in the stock market make money by buying when stock prices are low and selling when stock prices are high. It’s almost impossible to do this consistently because it is difficult to know everything about the company you are investing in and its industry. If the industry takes an unexpected hit, there is a high chance that it will have an impact on the company. As a result of this, the price of the company stock will fall, leading to a decrease in the value of your investment.

Investing in real estate can provide a source of consistent cash flow. If you own a property, you can rent it out and receive monthly payments from your tenants. In addition, the market prices for rental properties keep pace with inflation so that you will receive higher rental income should there be an increase in the cost of living.

Ultimately, people will always need housing – even in a recession. In these tough times, many people are forced to sell their homes and become renters. The demand for housing will always exist. In most recessions, real estate has actually played a vital role in the improvement of economic conditions. Home prices typically flatten or slightly decline, developers stop building homes for a period of time, and the demand for housing catches up to the lack of supply, which results in buyers’ willingness to pay more. This drives real estate prices upward again. As housing remains relatively steadfast during a recession, stock prices actually fall because many people do not hold on to their stock when there is a recession.

Unlike stocks and bonds, housing is a tangible asset which is far more valuable than a piece of paper. When the market goes down, the value may decrease on paper, but the physical asset still exists. This physical asset can still be used to create cash flow. The full value of your home can never be lost. Additionally, the fluctuation in housing prices creates the opportunity for the value of the house to increase over time. Even if the value of the house only increases with the rate of inflation, you can raise the price of the home up to 3% more, leading to greater equity over time.

Actively managed real estate provides better returns and lower risk than stock market investing. The long term nature of real estate assets ensures that you hold on even in times of volatility. In spite of economic ups and downs, rents and property prices continue to rise due to inflation.

In general, the longer you hold on to your real estate investment, the more your risk of loss will decrease, as home prices rise over time and you continue to build equity.

Leverage is a tool that many real estate investors use to build their portfolio of income-producing properties. Getting a mortgage to buy a rental property gives you leverage that you can use to invest in more properties with less money down. You could also invest in different types of real estate to help minimize risk.

For example: If you put down a 30% deposit on a $100,000 property, you are controlling an income-producing asset worth more than three times your cash investment. You are generating income by renting out a $100,000 property when all that you invested was $30,000.

Primary homeowners can claim the mortgage deduction on their taxes. However, real estate investors also benefit from their own set of tax incentives when they buy properties to resell or rent out. You can deduct all the expenses required to rehabilitate or remodel a home as capital expenses when you sell the home. By deducting the capital expenses from the income you make off the property, you can offset the profit you make and pay fewer taxes, if any.

Additionally, a mortgage interest deduction allows property owners to reduce their taxable income by the amount of interest paid on the loan.

Investment properties can also utilize debt to obtain larger properties and shield current income with interest payments. While principal payments are not deductible, the bulk of a mortgage payment in the first ten years will be allocated to interest that can be utilized to shelter the property’s income. “Pay downs” are payments made on the interest and/or principal on a loan.

Asset appreciation refers to an increase in the price or value of an investable asset over time. The increase can occur for a number of reasons, including increased demand or dwindling supply, or as a direct consequence of changes in inflation or interest rates.

Real estate investments can greatly appreciate during your lifespan. The goal is to keep overall costs down and generate positive cash flows. These preferred returns can be deducted using depreciation.

Real estate owners are permitted by the government to deduct a portion of their depreciable basis from cash flow. However, real estate does not deteriorate at such an accelerated rate. If you factor in maintenance, many properties outlast their respective depreciation schedules.

The schedule for deducting depreciation is contingent on the type of investment in question. For example, the depreciation period is 39 years for commercial properties, 27.5 years for apartment buildings, and 15 years for mobile homes.

Here’s what works out in favor of real estate investors: the asset, while it does depreciate, does not lose value most of the time. In fact, property values tend to go up over time. That means that you get a tax credit on the cost of an asset that may be going up in value, instead of going down. Furthermore, depreciation is a tax credit that is an addition to property maintenance and other costs that you can deduct from the rental income that you earn. This provides a tax deduction that lowers your tax liability.

If your allowable tax deductions for the year exceed your income for the year, you may have what is called a net operating loss (NOL). When more expenses than revenues are sustained during the period, the NOL for the company can generally be used to recover past tax payments. The rationale behind this is that corporations need to have some form of tax relief when they lose money. Applying the NOL to future income tax payments reduces the need to make payments in the future.

Paper losses are also often used to assess the performance of an investment, which has been known to be a more accurate form of measurement than just realized gains or losses. This is calculated by comparing the market price of a property to the original purchase price. Gains or losses only become realized when the property is sold.

A 1031 exchange allows an investor to sell a property, to transfer the earnings into a new property, and effectively eliminate taxes.

Real estate syndicate investing can be a savvy way to grow your capital, especially in today’s fast-paced, competitive market. Over the years, real estate syndications have enable individual investors to passively connect and combine the efforts of highly skilled real estate professionals, channeling their passion into productive real estate investments. It is clear that one of the many advantages of investing in real estate is that the tax laws could work in your favor.

Real estate syndication is an effective way for a group of investors to pool their capital in order to invest in larger properties and projects than they could as individual investors. This structure allows investors to invest passively while the fund operator or “sponsor” handles the management aspects and day-to-day duties of the project.

One of the great benefits of investing in syndications is that it gives investors the opportunity to leverage other operators’ expertise with their capital.

When you structure your opportunities like this, the sponsor only makes good money when the investor makes money. That way, both the sponsor and the investors’ incentives are more closely aligned with the fund’s performance.

No, you don’t need to be an accredited investor to sign up with us.  However, certain deals will be open to accredited investors only.

Prior to investing, you should consider seeking advice from your CPA to obtain the most precise tax guidance tailored to your individual circumstances.

As an investor in real estate syndication, you stand to benefit from various tax advantages associated with property ownership. These include accelerated depreciation and cost segregation, which can effectively reduce the taxable passive income you earn.

Annually, you will be furnished with a Schedule K-1 tax document, which must be included in your tax submissions. This document outlines your income and losses in connection with your investment.

In the event that you qualify as a real estate professional, there may be an opportunity to apply these paper losses to offset your regular income. Once again, it is strongly advised to consult with your CPA for comprehensive insights into your specific financial situation.

Bonus depreciation, also referred to as the additional first-year depreciation deduction, serves as a tax incentive that enables a business to promptly deduct a substantial portion of the acquisition cost of eligible assets, such as machinery, instead of spreading the deduction over the asset’s “useful life.” This method offers a legitimate and beneficial approach to offsetting your cash flow distributions. It is strongly recommended that you seek guidance from your CPA for more information.