As we have discussed before, there are four main benefits when you own investment property that add up to one big benefit in the end…security for you and your family. Again, the Big 4 are Cash Flow Before Taxes, Principal Reduction, Depreciation and Appreciation.
But let us talk, just for this post, about Principal Reduction. Assuming you have purchased the right property (not the one mentioned here or here) your other three benefits are kicking in. But PR is my favorite. Not necessarily the biggest return…but my favorite. Why? BECAUSE SOMEBODY ELSE IS BUYING YOU A HOUSE IN YOUR NAME!!!
Think about this. Every month someone scribbles a check to you for rent. Inside of that check is your interest due, your extra cash, your expenses AND an amount that is designated towards your principal. Not a great amount at first, but pay down they do…for you! (Unless, of course, you’ve gone with a negative am loan…which I’m not too crazy about for our market here in Kansas City. I see cause for them on the coasts…but not here…in most cases…of course everything is a case by case basis…have I covered all my bases yet?)
Month after month, lease after lease these people (we’ll call them tenants) are going to work, earning money and helping you to purchase a house so that when you are older you can retire in comfort. Personally, I think it’s awfully nice of these tenants to do this and that is why I don’t mind the occasionally call from them about this or that.
What are your thoughts on the subject, Hobson?