How Real Estate Investing Can Seriously Boost Your Cash Flow

How Real Estate Investing Can Seriously Boost Your Cash Flow

Real estate investing can boost your cash flow. I’m not talking about a little boost. Investing in real estate has the power to seriously increase your income. It’s an exciting prospect and one I encourage many entrepreneurs to consider. How can real estate investing supercharge your cash flow? Let me tell you a quick story.

I was reared in a blue-collar home and greatly appreciate the love and parenting that my parents provided. My father worked harder than anyone I knew as a child, and he provided a decent living for my family. I still remember some conversations our family had around the dinner table.

One of those conversations was my dad telling my mom that by September of that year, he would no longer have to pay Social Security Tax because he would have made the limit of income that could be taxed for Social Security. He proudly handed my mom his check so she could see the check stub that had his total income and taxes withdrawn for the year. The limit on income for that year for SS taxes was $68,000.

I asked if I could look at it and was flabbergasted to see that he was paying nearly half of his income in payroll taxes, union dues and health insurance. I was just a teenager but that seemed like a lot to me, even then.

 

The Low-Down on Taxes 

The average American – as of 2013 – was paying 59.7% of their income in taxes. That means if you are making $1000 per week in earned income, you only have $400 dollars a week you actually control.  I really hope this is as incredulous to you as it was to me. I mean, wow!

Think about the many taxes that we pay: Capital Gains Tax, Corporate Income Tax, Federal Income Tax, Federal Unemployment Tax (FUTA), Fishing License Tax, Gasoline Tax, Hunting License Tax, Inheritance Tax Interest expense (tax on the money), Inventory tax IRS Interest Charges (tax on top of tax), IRS Penalties (tax on top of tax), Local Income Tax, Luxury Taxes, Marriage License Tax, Medicare Tax, Property Tax, Service Charge Taxes, Social Security Tax, Road Usage Taxes (Truckers), Sales Taxes, Road Toll Booth Taxes, School Tax, State Income Tax, State Unemployment Tax (SUTA), Telephone state and local tax, Utility Taxes, Vehicle License Registration Tax, Workers Compensation Tax… the list goes on and on and on.

So, back to the original question: how can real estate investing seriously boost your cash flow? Well, with real estate investing you can convert earned income (the highest taxed income) into passive Income or capital gains income.

The bottom line is that the type of income you make matters!

 

Two Ways Real Estate Income Can Boost Your Cash Flow 

 

Passive Income

Rents from real estate are considered passive income and are taxed at a much lower rate than earned income, which you make from working a 9:00-5:00 job. Real estate income – in the form of rent – puts approximately 30% more income into your pocket than income from your day job. Why? You don’t have to pay social security tax on passive income earnings.

 

Capital Gains Income

You make capital gains income when you sell real estate for a profit, after you have owned it for 12 months or more. Make note, though, that when you sell real estate as an investor that you have owned for less than 12 months it counts as earned income and is taxed at the higher rates. The length of time that you own a property matters.


 

So, if you take advantage of passive income and capital gains income, you have the real potential to boost your cash flow. Then, I suggest you roll that “extra” income into more real estate.

See how this has the potential to really help you build some wealth? It’s exciting!

There are several other ways that you can supercharge your income from real estate investing. I’ve listed them below. It could be really beneficial to do some research about each of these potential boosters. But if you need a place to start – and some cash to get the ball rolling – remember the power of passive income and capital gains income. 

Several other ways to boost your cash flow include depreciation, interest and other costs, 1031 exchange, and cash-out refinance.

Interested in learning more about the tax benefits of real estate investing? Sign up below for access to my FREE library of resources. You will find more information about the tax benefits – and why this is motivation for you to get started TODAY – inside the library. 

 

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Billy Epperhart
Billy Epperhart
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