So you have been researching rental property and you are drowning in numbers. Cap rates? Cash on cash? Internal Rates of Return? Good grief. What you need to know is that rental property makes money four different ways.
- Cash Flow Before Taxes
- Principal Reduction
- Tax Savings
These four ways of making money with investment property are all intricately related. For instance, the more cash flow the cash real estate investor goes for the more likely he’ll have little to any appreciation as compared to surrounding areas. Likewise, the more appreciation a long term buy and hold investor goes for the less cash flow he’s like to accumulate (without a significant down payment) because these properties are usually in the nicer areas around town.
Sure, there are exceptions to the rule. But what you need to decide as new investor (or experienced trying to re-start) is what the end goal is before beginning.
Give our team a call today to help you make a plan for a retirement worth having.
Real Estate Investing in Kansas City
Keller Williams Realty
Diamond Partners, Inc
3 responses to “Rental Property Makes Money Four Different Ways”
So how much cash do you recommend and individual have to begin investing in rental houses?
That’s a loaded question that can be best answered off line. Feel free to call me at 913-568-1579 to discuss your situation.
The mortgage company will want you to have enough for a 20%-25% down payment and then anywhere from 3-6 months of reserves (PITI) before they’ll loan you the money. I’d say that’s a good starting point but again, everyone’s situation is different. So are there goals.
A Retirement Worth Having isn’t a canned answer. It’s a thoughtful plan.
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