The different ways that real estate makes you rich

Recently I was running the numbers on a rental property that I bought the more traditional route, 20% down.  On top of the downpayment, I am putting $7500 into renovating one of the two rough units that needed to be fixed in order to maximize the rental income.  In the past I have been primarily a BRRRR investor so outlaying this much cash without plans to pull it back out soon was a little concerning.  I bought this property well under market value so I could refinance it after stabilization but I would really like to keep a large amount of equity so right now I have no plans to refi.  

Ok, so back to the point.  After running the numbers and coming up with a cash on cash return that is lower than most of my other properties I started thinking about the other ways this property would make me money and it reminded me of the different ways real estate helps you build wealth in addition to cash flow:

1) Mortgage pay down.  The amount paid down gets larger every year and even on the very first year when mortgage pay down is the lowest it will be $5100 on this particular property.  That's an extra 10% to the return

2) Tax deduction for depreciation.  The structure is valued at $177k according to the tax appraiser(Which is typically about 25% below actual values in this area).  As an investor I currently get to write off a portion of that every year as depreciation.  The tax savings should be betwee $1600-$2000 per year.

3) Appreciation.  If the property appreciates 3% in an average year that is an additional $7500 per year.

No, I'm not buying the property for any of these three things but it sure does make for some nice icing on the cake!  Buy and hold real estate is just a phenomenal way to invest in something real and make great returns.  I love it and look forward to continuing to grow my portfolio.  I hope you do too!