Financial Friday: Can Investing Save You Money?

    Not only can investing bring in additional income, it can help you save money as well!

    Real estate is a great place to invest savings or even a loan if you are looking to make a little extra cash. By investing long-term, property value depreciates but other aspects of the investment can offset that. It is important, however, to find a lender that matches your needs and your budget if you are not able to purchase the investment on your own. In the long run, these investments can save you money in several different ways.

    Real estate investors are often rewarded with tax incentives that allow deductions to offset wage income. This can end up saving the investor so much money it can go from a negative to positive investment merely from the tax breaks. Costs can be lowered in the future as the value of the home depreciates and doesn’t cost as much for things like maintenance and utilities. Mortgage payment interest is also deductible on real estate investments and can save someone a large sum of money. This ties in with premiums on insurance policies for these investments which are also deductible. In summation, a lot can be saved in taxes on your potential investment properties.

    There is also a factor known as positive cash flow that occurs within this market of investing. Pre-tax positive cash flow is when income received is greater than expenses, which is essentially your end goal as an investor. After tax positive cash flow occurs when your expenses end up costing more than your income, but then all of the tax breaks bring you back into the positive. When budgeted properly, it should be quite simple to make a profit before tax breaks are included.

    Next, try not to spend any of your personal money on things like repairs that should be covered by banks or insurance. The best way to make money is to have money, as they say. This is called using leverage, when you avoid using any of your own money you then benefit more because you are making a larger profit. This increases equity and assets without any personal investment. With high equity, it will be easier to save on a mortgage and therefore make an even larger profit.

    Inflation rates can also occur in your area that you should be aware of. When inflation goes up in an area, that means less needs to be done to maintain the property because it now has a higher value. For example, you may be able to increase your rent due to the state of the market in terms of inflation, but your mortgage payments will remain the same. So while there are some risks in investing as we have discussed before, there are plenty of ways to make a hefty profit as well. Contact a BridgeView agent today to discuss finding that investment property for you!

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