I love investing in crypto, but you know what else I love investing in?
Rental Real Estate Properties!
Here is why I like it even better than crypto (yes, I just said that!). I still do love crypto though.
Three Reasons To Love Rental Real Estate
#1 - Principal Pay Down
With a rental property, your tenant(s) pay your mortgage for you.
For example - if you buy a $100,000 property and put down 20% you will have an $80,000 balance to pay off.
Who is actually paying this off though? It’s not you, it is your tenants. The rental income goes toward paying the mortgages, taxes, etc.
What’s great about this is you build equity even if the house does not appreciate at all since you are not coming out of pocket to pay of the mortgage.
So when the loan is paid off the property could still be worth the same $100k, yet you will only be $20k into it and have the $80k in equity!
#2 - Cash Flow
I love me some passive income and cash flow from a rental property is essentially that!
If you read my blog, you have seen me talk about "Buying Right." To buy right you run the financials of a property and only buy when you see positive cash flow will be produced after deducting all of your operating expenses from the rental income
Going back to our example, you have $20,000 invested in a property. Let’s say you are cash flow positive $175 a month (which is very feasible). You are taking in $2,100 a year. Now divide that by the $20,000 you invested – yup, it’s better than a 10% return.
That alone is a pretty solid return. Add in the mortgage pay down and it’s even better.
#3 - Appreciation
I generally do not factor in appreciation in my rental property analysis. It's something that can swing for or against you depending on market conditions, which is why I always make sure a property will cash flow so I do not have to worry about the swings.
However, at a bare minimum you will see appreciation from the simple fact of inflation. Plus, if you buy right there is a good chance you did not overpay so if a market is moving higher than you will get the benefit of that appreciation.
Appreciation is like the cherry on the icing that is rental property investing!
Conclusion
Those are the three main reasons I like investing in rental real estate.
Best part, they are not the only ways real estate can make you money.
It’s one of the more tax friendly investments as depreciation and your upkeep costs are written off against your gains. Thus a lower tax bill on profits compared to things like stocks.
For more info on rental property investing visit http://scaredycatguide.com/ and feel free to download the rental property calculator!
Regards,
Disclaimer: All information in this post is my opinion and for informational purpose only.
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Owning rental property is one of the best ways to build long term wealth, and is accessable to almost anyone.
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Exactly, just cause I like to put 20% doesn't mean that is the only way. I have seen investors do zero down if the numbers makes sense in the end.
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There are many ways to get into a good rental property, it can definitely pay to be creative. I built my first duplex when I had no money to put down to buy something. Bank wouldn't lend to me for a purchase cause I had no cash down, but would let me build because they would only finance 80% final value, but that is about what it cost to build them. It worked great to get started.
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That is awesome. Gotta make it happen with the resources at hand. I have a buddy that wholesaled his forst two deals and than used that money for downpayment on a flip. He worked with the resources at hand. Good job man!
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All great reasons to buy rental properties. I just wish more Aussie investors had this mindset toward real estate. A few things strike me:
Gotta love the USA :)
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Jason....I will keep saying it. You are literally describing the US market in 2008. Every single point you made in parenthesis to the T! I really gotta start shorting Aussie lending companies....the bubble will burst.
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It has to. It's so crazy to be in it here because people literally think it will never happen. That's a key characteristic of a bubble though - most people have no idea what's about to happen.
I've invested pretty heavily in gold miners here. I think that will be a good contrarian play.
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I just took a look at the miners ETF (GDX) vs SPY (S&P 500) for 2008 through 2011, sadly there wasn't much divergence. Miners went down hard to, bounce maybe a couple months sooner than the market but the rally was similar.
I really thought I'd see a divergence. I like miners as the contrarian/flight to safety play. Maybe physical gold in Aussie dollar could be a play too.
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True, and I've considered that. The miners are definitely a bet on inflation and a weaker Aussie dollar, not deflation, which is what we saw in the 2008 USA housing crisis, at least until QE kicked in. I would expect the RBA and government here to respond right away with stimulus if the banks and housing market tank. I tend to think the housing market here will be fine until some shock from overseas. If I'm right, that would also lead to more economic stimulus and inflation worldwide, driving up the price of gold. Time will tell.
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Great post. I am doing that now but I with someone had told me this, way back when I was yonger. This is very educative, people take advantage.
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Yeah, I wish I would have started in my mid twenties rather than mid thirties, but atleast we got started!
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We have a had a rental for the past 5 years and it has worked great for us! Well...except for the first renter that I had to take to court to finally remove after he refused to pay. That is the one downside. Getting someone out of a rental (at least in Tennessee) is a LONG hard process. The laws definitely favor the renter.
It is fun to have someone else pay down your asset as long as it is appreciating. Just have to remember the three rules of real estate:
1)LOCATION
2)LOCATION
3)LOCATION
👍🏠
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Good rules for sure. And that is one thing I like about investing here in FL, are laws are landlord friendly!
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Yup! I've wanted to get into real estate at some point. Definitely good to diversify streams and types of income. The good thing about real estate vs. crypto is that people don't necessarily HAVE to have crypto. However, they DO have to live somewhere!
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Exactly my friend!
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great read, invested in a san diego condo when it was low and now it has gained 40,000$ in value! Real estate is a good way to make money
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Wow, that is a great score!
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thank you! has a great view as well, i don't even want to sell it yet, good vacation place
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Great advice, I would have to start raising the initial downpayment though, a tad more difficult in Singapore as the prices for real estate here is a lot higher.
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That's probably why all that money is coming into my FL real estate market instead and inflating the prices. Actually, its more China money, but still :-)
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I would invest in real Estate @scaredycatguide
The problem is the money LOL.
But I see your points there. Real property is a good option.
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Definitely do not need money to get started in RE. I got into a triplex with no money down. It was an investor deal where he put up the cash, and I put in all the work. Then we split profits 50/50.
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Also house hacking and Airbnb are great ways to get started in RE.
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I know a few guys with no money that managed to make it happen. One did some wholesaling to create funds, the other found a partner to team up with. It's possible
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