Why Invest in Rental Real Estate? 

 

-         Cash Flow.  The rental income generated by the homes should approach or exceed 1% of the homes value on a monthly basis. A rental home purchased for $75,000 should rent for no less than $750 per month.

-         Return on Investment.   This should include both net rental income and longer term appreciation. If a home purchased for $85,000 is rented at $1,100 per month and the annual property taxes and insurance total $4,000 the net monthly rental income is $767 or over $9000 per year. This is an 11% annual return on investment. If this home is subsequently sold in 5 years for $125,000, and during this 5 year period maintenance and improvements cost $10,000 (a worst case scenario) then the return from appreciation would exceed 35%.  These ratios improve if the investment home is financed.

-         Safety.   Real Estate is the ultimate real tangible property. It is historically an excellent hedge against inflation and it generates good cash flow return in economic hard times as well as good. Real Estate cannot go to zero; you cannot end up holding a worthless piece of paper!

• Tax Advantages.  If you have another source of income, real estate investments can offer excellent tax strategies. Please consult with your tax advisor regarding this, but do not underestimate the potential tax savings that can be achieved!