When it comes to my own real estate investment returns, I try my best to forecast the probability of meeting or beating that hopeful public market return of 7-10% CAGR mentioned above. Also, since real estate can take up more of my personal time and effort than public market investing, it makes sense to factor that in as well.
What You Need to Know About the Compound Annual Growth Rate
The money you spend improving your property that is not part of the usual “expenses and maintenance” of cash flow. In some sense, this is a subcategory of cash flow because it’s potentially “cash out of your pocket” at the time of doing it. But, because it's also voluntary, I don't count it there. I keep it in its own category and track it as such.
Let's look at some ways you will experience tax benefits. Each year, you can not only deduct any net loss on the property (rent minus expenses), but you can also depreciate the value of your property and add that to your expenses—which often puts your property taking a paper loss—which will result in overall tax savings now.