Investing on Your Side of the Fence

By
Real Estate Agent with Re/Max The Producers 20110530

The grass tends to look greener on the other side of the fence. Maybe that’s why some people invest in things they don’t understand. It has been said that the grass is just as hard to mow on the other side of the fence so stay with what your most familiar.

3283858-250.jpg

 

Single-family homes used for rental property give a person a chance to invest in something they understand: a home. They also have distinct advantages over other types of investments.

An investor can borrow up to 80% of the value at fixed interest rates 30 years. The financing creates leverage so that the investor can benefit from the increase in value of the home not just the down payment.

It is reasonable to expect that the home will appreciate while providing tax advantages and practical control that are not available with many other investments. Low housing inventory in many markets has caused rents to increase and low new home growth will make it difficult to keep up with demand.

Consider a $150,000 home purchased for cash that would rent for $1,500 per month. With $18,000 income and allowing for property taxes, insurance and maintenance, it is still reasonable to expect $10,000 net income. There would be an 8% return on investment without considering tax savings or future appreciation compared with 5-year CDs paying less than 2.35% and a 10-year Treasury yield at 2.13%.

An added bonus is the amortization that occurs on the loan as the principal is reduced with each payment. It becomes a forced savings account that increases the equity and isn’t taxable until the property is sold.

The reasonable control has a lot of appeal to many investors who find the volatility of the stock market unacceptable and don’t want the risk associated with alternative investments. Please contact me if you’d like to know more about available opportunities.

Comments (4)

Anthony Acosta - ALLATLANTACONDOS.COM
Harry Norman, REALTORS® - Atlanta, GA
Associate Broker

Good afternoon Michael McGlynn 

Thank you for sharing your information with all Active Rain members.

Have a great day 12/03/2017. 

Dec 03, 2017 12:22 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Michael, I have assisted a few buyers with an investment purchase, but not my niche.

Dec 03, 2017 02:46 PM
William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

My wife and I have done some investing, I wish we had started sooner.

Dec 03, 2017 05:52 PM
Eleanor Thorne
Equity Resources - Cary, NC
Equity Resources 919-649-5058

I think this is a great point!  We just closed a loan for a first time home buyer who purchased a duplex!  Investment Property is a smart choice!

Dec 04, 2017 09:20 AM

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?