I love investing in crypto, but you know what else I love investing in?
Rental Real Estate Properties!
Here is why I like it even better than crypto (yes, I just said that!). I still do love crypto though.
Three Reasons To Love Rental Real Estate
#1 - Principal Pay Down
With a rental property, your tenant(s) pay your mortgage for you.
For example - if you buy a $100,000 property and put down 20% you will have an $80,000 balance to pay off.
Who is actually paying this off though? It’s not you, it is your tenants. The rental income goes toward paying the mortgages, taxes, etc.
What’s great about this is you build equity even if the house does not appreciate at all since you are not coming out of pocket to pay of the mortgage.
So when the loan is paid off the property could still be worth the same $100k, yet you will only be $20k into it and have the $80k in equity!
#2 - Cash Flow
I love me some passive income and cash flow from a rental property is essentially that!
If you read my blog, you have seen me talk about "Buying Right." To buy right you run the financials of a property and only buy when you see positive cash flow will be produced after deducting all of your operating expenses from the rental income
Going back to our example, you have $20,000 invested in a property. Let’s say you are cash flow positive $175 a month (which is very feasible). You are taking in $2,100 a year. Now divide that by the $20,000 you invested – yup, it’s better than a 10% return.
That alone is a pretty solid return. Add in the mortgage pay down and it’s even better.
#3 - Appreciation
I generally do not factor in appreciation in my rental property analysis. It's something that can swing for or against you depending on market conditions, which is why I always make sure a property will cash flow so I do not have to worry about the swings.
However, at a bare minimum you will see appreciation from the simple fact of inflation. Plus, if you buy right there is a good chance you did not overpay so if a market is moving higher than you will get the benefit of that appreciation.
Appreciation is like the cherry on the icing that is rental property investing!
Conclusion
Those are the three main reasons I like investing in rental real estate.
Best part, they are not the only ways real estate can make you money.
It’s one of the more tax friendly investments as depreciation and your upkeep costs are written off against your gains. Thus a lower tax bill on profits compared to things like stocks.
For more info on rental property investing visit http://scaredycatguide.com/ and feel free to download the rental property calculator!
Regards,
Disclaimer: All information in this post is my opinion and for informational purpose only.