Cash flow: Cash flow nothing more than the difference between your income and your expenses on a piece of real estate. You could be cash flow positive or even negative. Any body would love to be cash flow positive. In the cash flow you receive, never use it all for a quick debt reduction. You would be walking a fine line. Maintain a strong positive cash flow and then you will have more options and room to plan.

Appreciation: Appreciation simply means an increase in the value of real estate. There are two kinds of appreciation. The first is “inflation,” which is economic conditions outside of your control. You may not gain much from this type of appreciation, as the gain is balanced by a higher cost of living. The second type is market appreciation, which you can control. When you develop your property, you increase the highest value. You can buy a piece of real estate that needs fixing and bring it back up to neighborhood property standards or a little higher; this in turn would give you a property that has a much higher value.

Leverage: Leverage is the ability to borrow a certain percentage of a property’s value. Real estate, compared to other field investments, offers you an extremely high degree of leverage. In some real estate investments, a couple buying a single-family home could get 95% financing. This further allows people to buy real estate with little money.

Amortization: Using leverage and using other people’s money, it comes with a payout schedule. Your outstanding balance is reduced with each payment made by you. A portion of each payment goes toward interest and the rest goes toward paying off the principal. The principal reduction is called amortization, lowering the debt. Therefore, amortization could make you wealthy, slowly and steadily.

Tax advantages: Owning real estate with the goal of making a profit allows you to withhold interest payments and other expenses when it comes time to pay taxes. But don’t be fooled into buying real estate because of the tax advantages; rather, buy it as it makes economic sense to do so.