Family Road Trip: Unveiling the IDEAL Side of Real Estate Investing

Family Road Trip: Unveiling the IDEAL Side of Real Estate Investing

Introduction:

This summer, our family embarked on an adventurous road trip through the scenic landscapes of Montana and Idaho. But this wasn't just any holiday; it was a journey into the world of real estate investing, a unique educational venture for our kids.

As we meandered through these beautiful states, we explored various investment property opportunities. Each property visit turned into an engaging lesson, where we delved into the essentials of real estate investment. Our teaching tool? The acronym IDEAL, a concept we learned from Chris Bird, a respected tax expert.

The IDEAL approach breaks down the allure of real estate investment into five digestible components:

1. Income from Cash Flows: The beauty of real estate lies in its potential to generate income. Whether it's a house on Airbnb, a car on Turo, or an RV on Outdoorsy, owning an asset that others find valuable can be lucrative. The key is to make it available for use, unlike the other factors of IDEAL that benefit you even if the property is for personal use only.

2. Deductions for Depreciation: Depreciation is a unique concept in real estate, often described as a 'phantom expense.' It allows you to reduce taxable income without actual cash expenditure. It's an intriguing aspect of real estate, where the IRS acknowledges the depreciation of property akin to cars or machinery.

3. Equity Increase: A significant aspect of real estate is the gradual increase in equity. Regardless of the property's market value, your equity grows as you pay off the mortgage. It's akin to a form of forced savings, building wealth over time.

4. Appreciation Over Time: Historically, real estate tends to appreciate, averaging around 4% per year. However, it's crucial to understand that this isn't a constant rise. Real estate markets can plateau or even dip. Our approach is long-term, where short-term gains are a bonus, but not the primary goal.

5. Leverage: One of the most compelling aspects of real estate is leverage. With a $100,000 investment, you can potentially acquire a property worth $400,000 to $500,000. This leverage amplifies your investment power and potential returns.

By the end of our trip, not only did we explore some beautiful locations, but our children also gained invaluable insights into the world of real estate investing. It was a summer well spent, blending family time with learning, all under the vast skies of Montana and Idaho.