The video below has the 4 benefits of owning rental properties.
I added a 5th benefit which I feel is just as important.
1) Appreciation - Over history real estate on average appreciates 6.8% per year. Even at a 5% average over a 10 year period your return on investment is 50% on appreciation alone.
2) Mortgage Reduction - Rental properties should at least cover your: principal, interest, property taxes, and insurance. The tenants build equity in your property.
3) Taxes - Depending on the type of property, and exit strategy, taxes can be deducted or deferred from your profits. You can also deduct expenses such as depreciation, cell phone, travel, dining, entertainment, home office, pda's , appliances, laptops, company car, mortgage interest, cleaning supplies etc. This can save you hundreds of thousands of dollars over the years.
4) Cash-flow - When you buy the right properties, After expenses are paid you get passive cash deposited into your bank account month after month. You can spend the profits on what ever you want or re-invest them to build wealth.
5) Leverage - When financing is available, this allows you to control the property for only a fraction of the price. Down-payments range between 10-30% down. (I.E. Paying 20k down to finance and control a $100k triplex, that cash-flow you $1k/month) The best thing about leverage is that the down payment does not have to be your money, it can be the from a bank, business partner, credit card, personal loan, friend etc.
Real Estate Attorney & CPA, Mark Kohler, explains the 4 benefits of rental property:
Appreciation, Mortgage Reduction, Taxes & Cash Flow.
Auxo Homes is an asset management of the company portfolio of emerging markets. The majority of his investments are made in single family rental properties.
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