Think about it...until the very recent past the best return you have seen on most any investment has been about 3-4% while real estate in Denver has appreciated at about 10% per year for the last 6 years. On top of that your investment at the most for rental properties has been between 20 & 35% of the value when you bought them. That means you would have been leveraging others money to increase your own. In short, your 30% investment has earned 100% of the appreciation. That is a great return!.
Rental homes are the IDEAL investment because they offer a higher rate of return than other investments without the volatilityof the stock market. With certificatesof deposit and bonds at less than 2%, people need an alternative investment that they understand and with a reasonable amount of control.
In this case, IDEAL is an acronym identifying the advantages of rental properties.
- Income from the monthly rent contributes to paying the expenses and a return on the investment.
- Depreciation is a non-cash deduction that shelters income for some investors.
- Equity buildup occurs with amortized mortgages because each payment is composed of interest owed and principal reduction to retire the loan by the end of the term.
- Appreciation is achieved as the value of the property goes up.
- Leverage can increase the return on investment by using borrowed funds to control a larger asset.
These individual benefits working together make rental real estate a good investment for today’s economy. Increased rents, high rental demand, good values and low, non-owner occupied mortgage rates contribute to positive cash flows and very favorable rates of return.
To find out more about how rentals might complement your current investment plans,contact me.
And lets add a bit to the equation....some of you may be thinking this has been a nice long run and it is time to sell those rentals. I just had a customer buy a rental from a client with no pressure and a fair price. Let's talk about selling those assets and how we could use a 1031 exchange to help you.