Have you been thinking about making a Real Estate investment? Is having rent come in once a month the only benefit to having an investment? Below I outline the four ways of making money with an investment property.
1. Cash Flow
Cash flow is rent that exceeds the monthly mortgage payment. When looking to invest, talk to a mortgage adviser to see what your projected mortgage payments. Then, talk to a Realtor about going rental rates.
2. Appreciation in Value
The average rate of appreciation is around 3%. Keep in mind, this fluctuates and you should be ready for a long term investment.
Start getting to know areas around town where you may want to invest. Look for trends, does the neighborhood seem to be improving, or declining. Finding an up-and-coming neighborhood is a great way to accelerate appreciation in value.
3. Tax Benefits
The government thinks it's beneficial for people to own homes. So, they offer tax benefits to home owners. You'll want to consult with a tax accountant about your eligibility for tax benefits.
4. Mortgage Payoff
Finally, while your property is going up in value, you are enjoying tax benefits, and a monthly rental income, your renters are also paying down your mortgage. The rate at which your mortgage is paid down depends on your interest rate and the term of your loan. Theoretically, your renters could pay for the whole house aside from the down payment.