Real estate provides multi-faceted investment returns.

• Property improvement for equity – Many investors intentionally purchase properties at a value because they lack some feature or could use some improvements in condition or amenities. They have calculated that the value of the improvements will exceed the cost, resulting in an immediate increase in equity. Get more information on ARV, or After Repair Value.
• Appreciation - Rental properties normally appreciate in value with inflation. Increased value can mean sale and reinvestment in higher value properties, or provide an equity line of credit to use for other investments. This is the second, and a historically proven value component of real estate investment return.
• Inflation is Rent-Friendly – Rents usually increase with inflation, while mortgage payments on the property remain stable. This increases cash flow, with more rent income without increased expense for holding the property. When inflation is up, it can also mean more renters, as the affordability of homes can be negatively impacted by inflation. More renters increases demand, so rents can escalate.
• Leverage - Using leverage, while being careful to buy properties with good rental yields, provides greater returns. Using $100,000 to purchase three properties with down payments, instead of one for $100,000 cash, can greatly increase returns. Of course, all leverage involves risk, so the successful investor must understand how leverage impacts their real estate investments.
• Paying down the loan – Amortization, or paying down the loan, frees up more investment resources to increase leverage. Some investors use increased equity in one property to free up funds to invest in others.