As with most investments, the goal is to buy low and sell high. This saying is particularly applicable to real estate investments. In today’s market, an abundance of opportunity exists for buying property under normal market value due to the state of the economy and the tightening up of lending restrictions.

Why is real estate still a good investment? To begin with, people need a place to live. If you purchase a property that needs work, for under market value, either through a foreclosure, an estate, a REO, a short sale, or simply a house that someone else can’t see the potential in, then you are actually securing your profit when you buy. Location is very important. If you have a good location and do the right work, you should reap a certain amount of appreciation per year that is much higher than what you would get from a certificate of deposit or a savings account. That percentage of appreciation, compounded each year, over time will result in a significant amount of money. So the longer you hold the property, the more you would ultimately make.

In the meantime, a savvy investor will buy, improve, and then lease out a real estate investment at a cost that not only covers a mortgage payment, if there is one, but will provide a tidy profit each month. That monthly income that your real estate investment generates can be put to work in other investments or simply to supplement your own monthly income. When income tax time rolls around, all of the normal deductions such as real estate taxes and interest may be taken, just as on your personal residence. However, on investment real estate, deductions may also be taken for cost of improving or remodeling the property, homeowner association fees, insurance, repairs, maintenance fees, cost of carrying the property when it is vacant, leasing fees, etc. All of these additional deductions usually mean that you will subtract a significant amount from what you owe in income taxes or receive back from the government a significant amount of cash after your tax return is filed. Either way, you are adding to your net worth.

Multiple profitable real estate investments can be used to increase your disposable income, help fund your retirement, and in many cases, create an avenue to wealth that can allow you to live from your investments alone.