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Two Major Advantages of Real Estate Investing   by Noel Markham

Both residential and commercial investment offer advantages that stocks and bonds lack. The ability to leverage your money and the good tax advantages that come from property ownership give real estate investment a powerful edge over other oppotunities.

Commercial and Residential Opportunities

Most people think residential property when they think about real estate investment, but there are many opportunities in the area of commercial property. Residential includes single-family Homes, condos and duplexes and a multiplex with up to 4 units. Commercial includes office space, retail, industrial, hospitality, leasehold, mineral rights and even air space. Possibly the reason why most people think of residential as an investment opportunity more so than commercial property is that we are all familiar with homes and apartments. You may have even heard some of the negative aspects of being a landlord and having to deal with tenants who do not pay their rent or who trash the place. While residential property is a good opportunity, investing in commercial property offers certain advantages. For example, if you are renting your house you are expected to pay the taxes and any repairs on the property. If you are renting commercial space it is often the tenant who pays the taxes and upkeep. And since the commercial space is more often than not, the tenant’s place of business, it is in their advantage to keep the place clean.

Leverage–An Advantage of Real Estate Investing

Leverage is the ability to do more with less. Using a lever, a 150-pound man can move a 300-pound boulder. As it applies to money and investing, leverage refers to using a small investment to obtain a large return. For example, in residential real estate it is possible to obtain a loan on the property you plan to buy for as low as twenty percent down. That means, for example, that for $20,000 you can purchase as $100,000 residential property. In years when real estate is increasing in value, your property will appreciate based on its complete value, not just on the down payment you made. Commercial property usually requires a larger down payment but the benefit of leverage still occurs. Compare real estate investment with investing in the stock market where you have no leverage. If you purchase $20,000 in stock, that is what you get. If the stock appreciates in value, you will profit but only for the amount of stock you own.

Tax Benefits–The Government Favors Real Estate Investment

Real estate investment offers additional advantages in the form of tax benefits. The most glaring benefit comes in the form of depreciation. The government allows you to depreciate your real estate property over a period of time and based on the full value of the property and deduct this from your income tax. This is true even if the property actually appreciated in value. Land, of course, cannot be depreciated but the structures or buildings upon the land can be. In commercial real estate, owning a leasehold might be a situation where you own the building but you lease the land. There are many potential tax benefits beyond depreciation.

About the Author

Noel Markham, MA
http://www.sellrealestate.net/

For information about the Dana Point real estate market visit http://www.ochomebuyer.com/.
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