There are several reasons to invest in real estate including appreciation, debt pay-down and long-term wealth building. But, there is no greater and more fundamental reason than cashflow!

THE THREE REASONS TO INVEST IN REAL ESTATE

Appreciation Appreciation is just what is sounds like – the real estate asset raises in value through time. Many markets support appreciation-based investing. That is, it’s a reasonably high chance that the value of real estate will increase equal to or at a higher rate than inflation. Therefore, the longer you own it the more your investment will be worth.Grays Harbor historically has not been a market that is well-designed for appreciation investment – buying something with a reasonable expectation that the value will increase at a substantial pace higher than inflation. Instead, while investing in GH you should view appreciation-based returns as a bonus and not factored into the good/bad deal analysis!

Debt Pay-Down One of the best parts about real estate investment – compared to stocks/equities, for instance – is that you don’t need 100% of the cash to own 100% of the asset. You can obtain a loan on, say, that 4 flex that you bought. You are required to put down 25%. So, while you only paid 25% of the value of the asset in cash, you own 100% of it and can reap the rewards of long-term real estate ownership, including debt pay-down.In the simplest terms, debt pay-down is the paying down (making payments) on the loan you have on your real estate asset(s). Except with rentals, instead of you making the payment (hopefully), you have tenants who are paying you for the ability to leave in the unit(s), which you apply to the loan payments and, slowly over time, you have a lower and lower loan balance and increase your net worth and equity in the property.
CashflowThe key with all investments is to own that investment for as long as possible. Why? Because compounding returns really do compound. So, how do you ensure you can own your real estate investment(s) for generations? Cashflow.Cashflow is the remaining $ above and beyond the property’s expenses that would serve as your profit as a property owner. Whether you want to re-invest that cash into the property (to increase its value), push that money into your next investment (the best thing ever – investments paying for the next investment), or you want to live off some of that profit – all of those choices are yours to make when you have positive cashflow in your real estate investments! Cashflow is the difference between the total cost of the property and the gross rents. Gross rents would be all rent that is collectible. Let’s take a look at a realistic fourplex investment and how it breaks down –
 Breakdown (monthly):
Total Income$4,000
Total Expenses:
10% (property management)
10% (reserves for maintenance and vacancy rate)$1950
– Mortgage$200 –
Insurance $200
– Taxes$175
– Water/Sewer$50
– Garbage
Remaining $ => $625 (this is your monthly theoretical positive cashflow)

In this case, you make ~$625/mo in positive cashflow – or roughly $7500/year. How many investment properties can you buy if every one of them cashflows positively? Assuming you have the down payments or save them up through your cashflow – limitless, right? How nice would it be to have recurring income of ~$600/mo for the rest of your life? That’s some groceries, a car payment, an awesome annual vacation or two. You choose!