Statistics show that investing in real estate and owning rental property is still one of the best ways to invest, even in our current market conditions. The fact is now is the best time to purchase investment property for most people.
Having investment property is not for everyone…….It could be labor intensive, and it’s not very liquid. Holding onto the property will most likely give you greater return. This is why you are more likely to “make” more money purchasing investment property than you may be able to “make” in other investment vehicles.
During the current market conditions, most homes have dropped in value. In California we have many people loosing their homes and moving into rentals. With the increase of these, home sales have dropped and our rental market is high. investors can take advantage of this and put extra cash in their pocket.
Lets look at an example of a home currently on the market. I found a home for $150,000 it is a 3 Bedroom + loft/office, 2 1/2 Bathroom, 1595sqft, 2 car garage, close to schools and shopping, move-in ready home in a nice neighborhood. This would be a perfect investment home.
- $160,000 purchase price (including closing costs, negotiated price and closing costs – estimated)
- $30,000 down payment (may be less than 20% depending on the type of loan)
- $1,300.00 a month estimated mortgage, taxes & insurance (depends on loan and interest rate)
- $1,600.00 a month is the amount this home can currently be rented
- $300.00 profit each month
With these numbers it will take you 100 months to make back your down payment, but don’t forget the other values owning rental property brings. Each year you own the home you will receive an extra income tax deduction. The hope is that you can make just a little money each month and hold onto the home until the market values go up and you can sell the home for a much larger profit. A few years ago investors would purchase investment property and have a negative cash flow each month, that is not usually the case today.
These are rough numbers and every situation is different. It is important that you talk to a Realtor to see what your numbers might look like.
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