One of the reasons I love owning rental properties is because it puts my money to work for me.
Real estate is just one of many ways to put your money to work. However, it is my favorite so let’s talk about it.
Make Your Money Work For You Using Real Estate
When I use money to invest in rental properties I’m essentially giving two jobs to that money. Jobs that earn me money from that money. My money grows on its own, that is the type of money I like!
Rental Cash Flow
The first job that the money has is providing monthly cash flow to me. This is why I preach buying right and why we use the property calculator to analyze deals. Literally my whole book is wrapped around the theme of buying right.
A rental property must provide positive cash flow in order for your money to be working for you in this regard.
Remember, we always want to factor in a percentage of rents for vacancies and maintenance to figure out expected cash flow. If you do not, then you can easily see cash flow go from positive to negative.
Principal pay down
This job is why I like using loans to purchase rental properties. Being I am the scaredycat, I do not over leverage and generally put 20% down on my purchases.
However, I’m still using leverage to have more properties for roughly the same amount of money out of pocket as if I were to purchase with cash.
The best part of those properties is my tenants are paying down the mortgage for me. Thus increasing the value of the property by the sheer fact the principal on the loan is shrinking each month.
So again, my money earning money.
In the end there are really two ways to earn more money.
You can work more or put your money to work for you. Whether it’s real estate or some other investment. Put your money to work for you now!