13/10/2023
When it comes to real estate , the conventional wisdom says you should always aim for a positive cash flow. But what if we told you that this isn't the only path to success in the real estate market? 😱
In this video, we're going to debunk the myth that you need positive cash flow to make work for you. Consider a property valued at €100,000 with a standard 3% net return on rent in a prime location. In this case, you're looking at €3,000 in annual rent income for every €100,000 in value.
Now, it's essential to consider the costs, primarily the . We'll be conservative here and calculate with a 4% interest rate, along with a 2% standard principal payment. This gives us a yearly negative of €3,000 for every €100,000 property invested.
Negative cash flow is typically seen as a red flag in real estate . However, there's a significant tax advantage that many people overlook. Real estate is one of the best ways to save on taxes. You can deduct all the costs associated with your rental property from your taxable income, but remember, this applies only to investment , not your primary residence.
Now, if your taxable income exceeds a certain threshold, you'll face a rate of 42%. Here's where the magic happens. By deducting your mortgage interest, which is a real benefit of 1.68%, and accounting for property depreciation, which increases your return by 1.26%, you effectively offset your pre-tax negative cash flow. In other words, after factoring in tax benefits, your cash flow returns to zero.
In conclusion, buying a property without can be an incredibly profitable investment in the long run. It's a strategy that combines the benefits of tax deductions, principal reduction, increasing rents, and property value appreciation. So, while the initial cash flow may be negative, the overall returns can make it a wise financial move.
Watch the full here: https://youtu.be/VfRI_PcuhrI
the full article on our GermanReal.Estate FAQ in English:- coming soon -Lesen Sie den Artikel in unserem GermanReal.Estate FAQ auf Deutsch:- folgt bald...