This week I have been reviewing the 4 Benefits of real estate investing. And today I want to re-tackle the #2 benefit of principal reduction. Actually, I’ve done this before and I’m not really sure that I could do any better. So click the “before” link and read. Also be sure to read the comments because a great alternative is discussed.
Personally, I love the fact that each month I collect rent a portion of that rent is going towards the reduction of my loan balance. I love that my tenants are buying me a house! But Jeff Brown
makes a great argument about using interest only or negative am loans to accomplish even greater growth.
Jeff has been doing what I do for about 30 years longer than me. So do you think I’m going to say he’s silly? That’s 30 years of real world experience. I listen when he talks. But on this subject, I still take it case by case.
In a faster growing market I think the advice to go interest only makes sense all the time. Here in Kansas City when investing in real estate I want to weigh the options of what the rent will bring, down payment involved and how high I expect the growth to be over the next 5 years. (A forecast, at best.)
Kansas City real estate is currently still on an upswing, growth wise. Though much slower than
several years ago. Heavy inventories and rising foreclosures have dampened our normal 5%-7% growth to around 1%-3% in a lot of areas. Still not bad when considering the coasts.
So be sure to look at alternative mortgages when buying your next Kansas City real estate investment property. But get some advice and do some calculations before deciding to go with either. Sharpen some pencils and go to work. Make an educated decision.
Your thoughts, Jeff?