14 Feb Why you should consider rental property
Why you should consider rental property
What are the benefits of a rental property
Will Rogers once said, “Real estate is a great investment because they an’t making it anymore.”
This message rings true today. During a time of historically low interest rates and escalating rental prices…rental properties make a lot of sense. With our rates we now find you can have a positive cash flow without using depreciation on the investment for your taxes. That is remarkable. So, you have the renters paying your mortgage, taxes and maintenance. Add to that the appreciation we are seeing of 8 percent yearly on the total value of the property. Not the 20% down you used to secure the mortgage. So, let’s do the math… you buy a four-plex for $500,000. You put 20 percent down, which is $100,000. You get, say 6% yearly appreciation on the total value. So, the first year you have an increase value of $30,000 ($500,000 x 6%) and you invested $100,000. So, a 30 percent return in one year. Plus, your renters just reduced your mortgage balance.
We can talk about how a duplex, fourplex or larger apartment building might be a wonderful supplement to your retirement portfolio.
What are the drawbacks of a rental property
Well you manage the property unless you hire that out. That means you need to coordinate any needed repairs and supervise the maintenance and upkeep. Like making sure the lawn’s mowed and snow shoveled. I can help with those services and have a list of contractors for needed repairs.
The other would be the down payment. Unless you are going to live in one of the units you normally need 20 percent down. An option is a line of credit on your existing home.
Many people find investment properties to be the most secure and best investment they can make. With average appreciation it makes it all that much the better. If you are just starting out, consider a duplex or four plex to also live in. You only need as little as 3.5% down in that case. And then when you need a single-family home for a lifestyle change you keep that wonderful investment. It’s substantial monthly income when the mortgage is free and clear. The result might be an early retirement.
For further information. Or to sit down and discuss this rent to own program with Jeff Anderson / RE/MAX Results or one of his team members, please call 612-386-8600.
Please contact The Anderson Team with any questions. We are here to help educate you the process of looking for the right home with our rent to own program