Real Estate Investing - The Benefits from an Expert Investor

Benefit I-Tax Shelter
Through owning income producing real estate, Investors are able to use depreciation to offset a portion of the income a property generates. Through effective use of cost segregation, we are able to break out the components which make up a property and depreciate them on more aggressive schedules than typical straight line 27.5 year method.
If financing is used on the property, the amount of interest paid to a Lender is deductible expense which can also be used to lower the taxable income of a property.

Benefit II-Leverage
Income producing real estate is an asset which can be financed up to approximately 70-75% of appraised value. These loans can be non-recourse, which means an individual does not need to personally guarantee repayment of the loan. The asset is pledged as the sole security for repayment of the loan. Using leverage allows you to build up more assets over time using Other People's Money (OPM). The more assets you are able to acquire translates into greater income and wealth in the future. The interest paid on the loans is deductible, and the people actually working hard to pay off your mortgage are your tenants. This is another example leverage being used called "OPW", which stands for Other People's Work (OPW).

Benefit III-Inflation Hedged Income
Income from real estate is inflation hedged, as rents can be increased over time to keep up with inflation. The rising income will also lead to increased value, as income properties derive most of their valuation from the amount of income they produce. Many retirees today who did not have cost of living adjustments as part of their pensions are now struggling as their income stayed flat while the price of everything else rose.

Benefit IV-Tax Deferred Income*
Income from real estate can be tax deferred and in some cases actually tax free. Depending upon what your tax status is and your need for income, one of the best ways to pull money out of income producing real estate is to refinance it and pull cash out. Borrowed money is not defined as income, and is therefore not taxable as such. Income from the property will pay down the loan, and the interest paid is tax deductible. This strategy can be done repeatedly, putting tax free cash in to your pocket. Assuming you never sell the property but pass it on to your heirs, they will inherit the property at a stepped up basis, and those monies from the refinance will essentially have been tax free "income" to you.
If you decide that you want to sell your property and buy a different income producing one, you can defer any gain you have from the sale through doing a qualified IRC Section 1031 exchange aka "Starker Exchange". The basis you have from the old property moves with you into the new property. There are rules to follow, but through doing these exchanges, you could continually grow your portfolio through buying larger and larger assets. Again you could pass the property on to your heirs or leave it to your favorite charity and there would be no taxable gain to them.

Benefit V-Perpetual Income
Besides all of the other benefits income producing real estate has for an Investor, the benefit of income in to perpetuity cannot be overstated. Through proper planning and management, income producing real estate can provide you with income you will never out live, as well as the chance to leave an income stream to future generations. The asset could also be used to create a legacy of giving by leaving it to your favorite charity or house of worship.