Nowadays there are plenty of ways to invest in the markets and best among them is beginning real estate investing. Investing in real estate has some terrific advantages over other investing alternatives. If and when you begin investing in real estate you will get many benefits which are favorable through this investment vehicle.

One of the biggest advantages of investing in real estate is financial leverage. If you get loans for real estate investing from banks, you typically can get it with 10% down payment as your contribution, which means your returns would be magnified 10 times. If you, let's say, have $10,000 to invest and all asset class give a return of 10% per year, then investing these $10,000 in stock would result in $11,000 at the end of the year, with a gain of just $1,000. While on the other hand investing the same $10,000 in real estate worth $100,000 (with $90,000 as bank loan) would result in $110,000 with a total gain of $10,000.

As you see from the example, your $10,000 has been doubled using real estate investment, whereas it could only produce an extra $1,000 in the stock market. You can understand the reason for this - your lender's money is working for you too. That is the power of leverage and is one of the greatest advantages of investing in real estate. As you will see, there are many more advantages to begin investing in real estate.

The tax benefit that one can avail is another good reason for beginning real estate investing. The REQUIRED depreciation by the IRS on the property provides one of the best tax breaks by showing a "paper loss" on the property when in most cases the value of the property is appreciating. The juicier part of the story is that one pays taxes on a reported profit figure that is significantly lower than the actual earnings.

A great tax benefit is the 1031 exchange. This exchange is defined by the IRS Code. This exchange permits investors to delay the payment of capital gains taxes if the gains are later reinvested in another property that meets the codes guidelines. The government wants people to stay in the real estate market and reinforces this with this tax benefit.

Flexibility is one final benefit of beginning real estate investing. Sale contracts can offer flexibility. Creativity can be used when writing your offers, unlike the stock market. Contracts can include exchanges beyond the traditional cash for property. This can create a greater return and a win-win situation for the buyer and seller.

If you become a real estate investor, you can look forward to stupendous profits. But how does real estate investing work that it begets such returns? Beginning real estate investing, if you leverage your down payment to earn a return on the entire value of the property, you profits soar a lot more. Required depreciation allowed by the IRS brings the actual tax liability down every year but on the contrary the actual market value appreciates. So you pay less tax on the reported profit figure which is lower than your actual earnings. You can exchange virtually anything for a property leading to some spectacular win-win arrangements.