Real Estate - Top 5 Benefits

Income

The income of a property is mostly made of the rents paid by the tenants, expenses are made of the cost of operating the property, including debt. A well chosen, managed and stabilized asset will generate a positive cash flow (income minus expenses) that will be distributed to the investors.

Depreciation

An investment property is an asset that can be depreciated over time, typically resulting in tax savings applicable to investors via a K-1 form.

Equity

Through the ownership of a property, rental income from the property pays the debt service (loan), including the principal. Upon sale of the property, the principal reductions will be returned to investors.

Appreciation

Single family homes (up to 4 units) have their value based on property comparable properties in the vicinity. The value of a single family home can be increased through renovations, or additions of new rooms or floor.

A multifamily property is a business that is valued by its Net Operating Income (NOI) and Capitalization Rate of the market. Through physical and operational improvements, you can increase the value of the property by increasing NOI.

Leverage

Banks offer investors loans on the acquisition of an asset with 20%-30% down payment allowing to control an asset with a value 3 to 5 times larger than the money invested. Returns are increased thanks to this leverage.

Moreover, for amounts above one million dollars, these loans are non-recourse and backed by the asset. There are no limits to the amount of loans an investor can have.