4 Reasons to Buy a Rental Property

rental factorsRental properties have four primary factors which contribute to a return on investment. Based upon market conditions and investor strategies, the motivating factor for individual investors varies among the following:

  • Tax Savings – Once upon a time, the benefit of tax savings to offset income from other sources was a primary consideration to most investors. However, in today’s financial environment, they are more likely seen as incidental benefits.
  • Appreciation – Savvy investors today are using conservative estimates for long-term holding periods.
  • Leverage – When borrowed funds are used to control a larger asset, leverage occurs. Positive leverage can increase the actual yield on an investment.
  • Cash Flow – When rents are greater than the expenses of operating the property and servicing the debt, there is a positive cash flow. A property with a good cash flow doesn’t have to appreciate in value to justify the investment.

The combination of lower prices, incredibly low mortgage rates and rising rents are attracting investors to rental properties. Single-family homes in predominantly owner-occupied neighborhoods are especially in demand for savvy investors today.

Cash Flow

Even without the benefits of tax savings, potential appreciation and leverage, the attractive cash flows possible today make rental property a very smart investment alternative. If you’re curious, we’d be happy to meet with you to discuss your options. And if you want to plug some numbers into one of our financial calculators made just for this, check out Your Best Investment. (Then let’s talk.)

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