Rental homes are the IDEAL investment because they offer a higher rate of return than other investments without the volatility of the stock market. With certificates of 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 your real estate professional.