If you're considering Buying Rental Property as a good investment. It's all about the numbers. It's not as much about the tingly feeling of purchasing a home that you're going to live in. It's more of a business decision. You're searching for a sound buy on a rental home with foreseeable cash flow.
When done correctly, buying rental property can really be one of the best investments that you can make! Regrettably, so many do it incorrectly. I have seen friends make subtle, yet big errors that often cost them all their savings. It can be hazardous, yet every bit as rewarding when you succeed, all the same, I don't feel that it's as risky as many other types of investing out there.
Why is buying rental property a good idea?
Well the first advantage is you can use someone else's money to purchase the property. Compared to stocks where you must have cash to be a player. With the exception of a down payment, you use the bank funds to purchase the investment. They are some financial intuitions that let you purchase with no money down.
Sometimes it's makes more sense to invest in real estate instead of stocks. With stocks...You earnings usually go up and down. With a rental, you know exactly how much you will receive monthly in rental income. Naturally the value will change with the market, but in the end, you own it!
When buying rental property you are the investor...Your renters provide the future financial support of your investment funds helping you with a positive...CASH FLOW! And the added advantages of tax write-offs, interest deductions, and of course providing someone with affordable housing.
Where else can you get such a good return? I think that investors, have the best opportunity right now with the current condition of the housing market. Now is the time for some strategic real estate investing, as it's a very attractive time to buy...Could this be the best time in history to purchase investment property. But be cautious! It's so easy to get thrown off guard in all the excitement of investing in real estate.
As I brought up earlier, I've seen good friends leverage themselves to an unacceptably hazardous place. I've cautioned them again and again about mixing their personal and business funds. I've also discouraged about mixing one investment funding with another one. A good rule to follow is to Never rob Peter to pay Paul. Sooner or later Peter runs out of money! This often leads to the investor going broke, bankrupt, and having to go back to renting again themselves.
3 Crucial Tips When Buying Rental Property...Real estate investing success.
>>>> Buying Tip Number 1...When borrowing to purchase a rental property, don't borrow more than 70% of the purchase price. If you only owe 70% [or better if less] of what the property is worth, you have a comfortable buffer in event that you have to lower the price for a fast sell.
>>>> Buying Tip Number 2...With investment real estate knowing the vacancy rate in the area your planning on buying in is vital. Many investors factor their numbers without approximating a vacancy and cost repair amount. If the property is only vacant for one month, it's still a important factor to consider.
>>>> Buying Tip Number 3...You should set up an expense account! Over and over again, this is typically neglected by overzealous investors. A good system to use is the 70/20/10 method. That's where 70% of your cash flow goes into a rental account, 20% is put in a expense/vacancy account, and the other 10% to a savings account.
For instance: If your rental cash flow [after your expenses] was $550 per month, you would put $385.00 into my general account, $110.00 into my expense/vacancy account, and $55.00 into the savings account.
Don't ever use your own home as collateral for buying rental property! Image coming home and telling your wife that you have to move because you've lost the house.
Don't over mortgage your investment property....Remember the 70% Rule!
Don't take equity you have from your rental properties to purchase more properties. This is a frequent error that a lot of real estate beginners often make. Let your rental revenue pay off your rentals.
Don't combine your rental revenue with your personal money.
Are you secure in your job situation, Are you wanting to try out buying rental property as a investment? This may be the best time with the greatest chances that we'll see in our lifetime. Remember to be cautious and keep in mind the above tips.