February 21, 2016 - 12:00
The power of owning real estate rentals is worth more than any other investment. The top three benefits of owning rental properties is cash flow or rate of return, appreciation, and using other people’s money (OPM) to purchase these properties.
Appreciation- Real estate prices are not always headed up, in some instances they can be lower than expected or higher. However, when you look at the overall picture, real estate prices are constantly rising because there will always be a growing population with a limited amount of land available. Meaning, by owning rental properties you are able ride the wave and see your property appreciate in value over the long-term. And if you are worried about making a wrong investment decision, remember that real estate is a hard and tangible asset unlike a stock or bond investment.
OPM- Getting involved in real estate doesn’t have to be a financial setback for you, because you can use OPM as leverage. There are many ways to construct a deal for a property to minimize the money coming out from your pocket! Making investments in real estate can be paid by using countless tactics and strategies, which will never happen when investing in stocks or gold.
Cash Flow or Rate of Return- Cash flow is simply what you have left after you collect the rent deducting insurance, taxes, HOA and maintenance for the property. For instance, if the total payment for the house is $1,100 a month and you rent it out for $1,300 a month; that’s a $200 profit. It might seem small now, but imagine owning 20 or 30 properties and receiving that cash flow each month! Also, rent can be increased gradually.
We’ve talked about appreciation. Now, let’s imagine you will keep all the rentals for 15-20 years. Mortgages are properly paid and the properties would appreciate a lot more at that time. You can leave a legacy for the next generation.
Owning rental properties give you unlimited opportunities to build wealth or have a second residual income every month. There are many benefits and different angles you can look at real estate, just always remember that the more creative you are when constructing your deals the more opportunities you have to create more wealth for yourself!
At Tran Realty, we can help you look for income producing properties easily since we are expert in buying distress properties in all market.