Have you heard about real estate investing and wondered “what is it and should I consider it?” Great question! Historically, real estate has been one of the best vehicles in terms of total return on investment (ROI) compared to others. But, before you throw your hand up and tell your Realtor “I wanna buy an investment property!” it’s important to create an attainable goal and decide what type of investor you can or want to be given your current circumstances. And, the latter is usually dictated by the money, knowledge, and time you have available to analyze, locate, secure, and set up the investment property.

Seem too complicated? This is where picking a real estate agent that knows this world through education AND experience is important! Because, yes, unlike putting money into your Roth or 401K, buying a piece of property to rent out does require a bit of up-front effort and on-going effort depending upon your investment strategy. But, this is why the returns are better! And, leveraging your agent can help you get into the game.

real estate investing in minnesota — FOUR different ways REI can pay you below!

So, why invest in real estate? Unlike retirement accounts, stocks/mutual funds, REI can pay you FOUR different ways! For this, remember the acronym PACT.

1. Principal paydown: Assuming you don’t have hundreds of thousands to millions of dollars just lying around, one of the greatest differentiators with REI is the ability to use debt to buy and make decisions about property. Principal paydown is where your tenants are actually paying off all or a portion of that debt from the rent you are collecting from them.

2. Appreciation: Real property has an amazing track record of going up in value over time compared to many other investment vehicles. As the old saying goes “time in the market beats timing the market.”

3. Cashflow: This is where your revenue (rents) MINUS all your expenses and debt = (hopefully) positive cashflow each month. Though, there are times and markets where negative cashflow might be okay because the track record and future appreciation could be so strong over the long run that the total return is still good.

4. Tax benefits - the United States tax code has some significant tax benefits for those who own property. We’ll skip the details of how and why for the sake of this post but if you are a W2 employee, buying even one property could possibly save you a good amount in taxes each year.

So, now that we’ve shown the benefits of REI vs other investments, let’s chat about what strategy might work for you! Whether you want to buy a property and rent out rooms to some friends, rent to long-term tenants, flip houses, or buy a short-term rental, REI is an extremely broad umbrella and has many different ways to achieve returns you won’t find in other investments. We’d love to pick up the conversation to see if REI is a good fit for you!

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