Cash flow is the net income from a real estate investment after mortgage payments and operating expenses have been made. A key benefit of real estate investing is its ability to generate cash flow. In many cases, cash flow only strengthens over time as you pay down your mortgage—and build up your equity.

Real estate values tend to increase over time, and with a good investment, you can turn a profit when it's time to sell. Rents also tend to rise over time, which can lead to higher cash flow as mortgages are paid down.

Depending on where your investment is located tax codes may vary, but real estate investors can take advantage of numerous tax breaks and deductions that can save money at tax time. In general, you can deduct the reasonable costs of owning, operating, and managing a property. The deductions can offset income and reduce your overall taxes.

Building wealth with real estate is achieved by paying down a property mortgage, allowing you to build equity—an asset that's part of your net worth. And as you build equity, you have the leverage to buy more properties and increase cash flow and wealth even further.

Net worth is the total value of all the money you have and the assets you own, minus all of your debts. As an example:

Your Net Worth: (Assets) $190,000 - (Debts) $110,000 = $80,000