Principal Reduction Is STILL My Favorite

Of the 4 Benefits of Real Estate Investing I have to say that Principal Reduction is STILL my favorite.  To me, the reasons are obvious.  But if you are looking at real estate investing for the first time we can go over them…just in case.

The 4 Benefits of Real Estate Investing are;

  1. Cash Flow Before Taxes
  2. Principal Reduction
  3. Tax Reductions
  4. Appreciation

Feel free to go back in our history here to read about the other 3 benes.  But let’s talk about Principal Reduction.

Today I received my rent due for February from one of my tenants.  Included in that rent payment was enough to cover my mortgage, taxes, insurance and just a hair of cash flow.  (And only by the slightest of margins.)  But that mortgage is a 30 year fixed.  So each and every month when I transfer that rent payment into and then out of my checking account as I forward it on to the mortgage company I am reducing my debt on that rental property.

And the tenant is the one reducing my mortgage!  Sure, when I have that odd month that I have a vacancy I’m the one contributing to my “forced savings plan.”  But I’ve rarely had vacancies so, in effect, there are some very nice people around the Olathe, Kansas area that are helping me to buy this investment property.  🙂

That just makes me smile.

Owning investment property isn’t get rich over night.  I know. You want it to be.  But it just isn’t for most of us normal people.  And even the super rich have winded up in bankruptcy trying to cheat the process.  Get out your amortization chart, relax and go with it.

 

2 Comments

Filed under 4 Benefits of Real Estate Investing

2 responses to “Principal Reduction Is STILL My Favorite

  1. Thanks for this blog. I am trying to get into rental income myself and was wondering what your percentage of profit margin is for a potential property. For example, I have heard that most investors want a one percent return on ant money invested. $50,000 mortaged plus $50,000 invested equals $100,000 purchase. So the pocketable return should be $500 per month. Is this how you do it or do you have another system or formula? Any Ifo you have would be much appreciated!
    Garrigus Real Estate, Beaumont

  2. Garrigus, there are as many different ways to measure returns as there are investors. I would warn you, however, that an acceptable return in KC is a stellar return in LA but a horrible return somewhere else. Like regular real esate, everything is local.

    I see you are in the biz. Give me a call. We can talk. Love talking about REI. 913.568.1579

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