Stop working your side job.
Let us show you how to unlock the equity in your home to help finance the purchase of rental property.
When you decide to invest in an income property, you become your own boss. You choose what property to invest in, what tenant you will rent to, how much you will charge in rent and how you will manage and maintain the property.
Benefits of Owning an Investment Property
1. Property Value Increases
Your investment WILL grow. You don’t just earn rental income; as real estate values increase, your investment rises in value. If you buy in a high-demand area, your property will increase in value after you purchase it, and some strategic renovations will boost the value.
You invest $80,000 of your home equity to buy a property and borrow $320,000 from a bank. By combining your money with the bank loaned money, you are now able to buy a $400,000 investment property.
We will assume that each year, for 10 years, your investment property will appreciate by 4%. Here is where the ability to leverage benefits you. The appreciation is on the entire $400,000 asset, not only the $80,000 of your own money.
Year 0: $400,000 x1.04 (4% appreciation)
Year 1: $416,000 x1.04 (4% appreciation)
Year 2: $432,640 x1.04 (4% appreciation)
Year 3: $449,945 x1.04 (4% appreciation)
Year 4: $467,943 x1.04 (4% appreciation)
Year 5: $486,661 x1.04 (4% appreciation)
Year 6: $506,127 x1.04 (4% appreciation)
Year 7: $526,372 x1.04 (4% appreciation)
Year 8: $547,427 x1.04 (4% appreciation)
Year 9: $569,324 x1.04 (4% appreciation)
Year 10: $592,097
After 10 years, your property value would have increased by almost $192,000. Thus, you would have turned your $80,000 investment into over a $192,000 appreciation profit simply by using leverage.
2. Let Someone Else Pay Down Your Mortgage
Let your renters pay off your mortgage, and when they do, you have another property with no debt. Tenants pay down your debt. Debt pay-down and property appreciation increase your equity. As you saw above, property value increases 3 percent each year.
3. You Receive a Regular Monthly Income
Other kinds of investments may pay out less often or income may be less predictable. If you intend to place tenants in your investment property, you will be able to receive rental income. Any money left after paying your expenses will be money in your pocket.
You have a legal duplex with a main floor tenant whose rent $1,300 a month and a basement tenant whose rent is $800 a month. Your mortgage payment is $1100 a month.
Thus, subtracting $1100 (mortgage payment) from $2100 (rent income) will leave you with $1000 to go into your pocket each month.
4. Pay Less Tax with Numerous Tax Write-Offs
As a rental property owner, you are entitled to huge tax deductions. You can write-off:
-Interest on Your Mortgage
-Interest on Credit Cards Used to Make Purchases For the Property
-Property Improvements and Upgrades
-Personal Vehicle and Travel Expenses
-Legal and Professional Fees
A Rental Property will generate long-term wealth, it can provide a steady income, it can pay for itself and it can make a very nice profit. This gives you more security for your money as well as have the capacity to borrow more money from financial institutions over time to invest in other houses.