Reasons Real Estate Rental Properties is an Excellent Investment

    

Real Estate Rental Properties are the best investment for every person interested in making money. Much better than stocks, mutual funds, IRA’s, etc. In one year, it is entirely possible to earn 780% return on your money invested into a rental property. A rental property business is not hard to learn or develop.When you look at how the laws are created to benefit those who own real estate, you too will see that real estate rental properties are the only true way for wealth creation and long term passive income. If you have one rental property or one hundred, these benefits will apply to you immediately.  Cash flow from the rent received is one the easiest the think of, but there are many more.

The shortage of suitable accommodation in Africa is pushing up rent and property prices in several cities and towns across the continent, making it one of the hottest and most promising places in the world for real estate investment.

     It just takes time and effort to do it right. Rental properties have many benefits to the investor and below are best reasons why real estate rental properties are better than all other investments.

1. Cash flow from monthly rent

 When you buy your rental properties, you must buy them to earn cash flow from day one. The rent minus expenses is your cash flow for the property. It is not uncommon to have anywhere from 200k - 300k in monthly cash flow from each property you own.

2. Equity Capture

You make your money on a real estate purchase when you buy the house. You realize the money when you sell. Buy low sell high.
Just as you buy the property to earn cash flow from day one, you also want to buy the property below market value, so you automatically gain equity on the property. If a three bedroom, two bath, single family home market value is 30m and you buy it for 20m, you automatically gain 10m in equity for the property.

3. Equity Buildup

You, as an investor, want to get paid for the value that you bring, not the hours that you work. To build up equity yourself, you can find the worst house in the best neighborhood, fix it up with minor repairs like paint, carpet, etc. and make the value of the home increase beyond the current market value. The same 30m home that you bought for 20m will be worth 40m after you fix up the property and make it worth more. Also, when you build the value, the rental income goes up because the property demands a higher rent due to the superior property compared to the others for rent in the area.

4. Market Appreciation

 Real estate has an excellent reputation as a relatively stable and consistent investment. Between 1978 and 2004, real estate investments provided an average return of 8.6% annually. Are there investments that pay higher returns? Yes, investing in the stock market, for instance, can yield much higher returns but it’s also significantly more volatile and risky.

5. Tenants Pay Your Mortgage for You

When you own income-producing property, you quite literally make money while you sleep. Even if you are actively involved in the management of your properties, you may not work every day but your tenants pay every day. And with strategies like Fow world properties (in which you purchase a home in need of no repair, with a tenant and property manager already in place), increasing your properties won’t necessarily increase your workload but will definitely and immediately increase your income.

With the monthly rent you collect each month, part of the money goes to pay the mortgage you took for the purchase of the property. A 100,000 home, which can be rented for 1,200 per month, with a 4%, 30 year mortgage is only 477 per month. That leaves 723 per month to pay the property manager and the expenses. The balance is yours to keep as passive income.

6.Owning rental property is Seen as a Business

Because owning rental properties is seen by the IRS as a business, you get many tax deductions.  These deductions makes it look like your passive income is lower and because of that, you save money.

 7. Depreciation

 The IRS lets you deduct the value of the property over 27.5 years. Depreciation is looked at as an expense, but no money was ever spent. You purchased the property, which makes you money and still has its actual value, and the IRS lets you deduct part of the value of the property over 27.5 years.
        Another great thing about depreciation is that if you give the property to your children, they get to start the entire depreciation cycle of 27.5 years all over again at the current market value!
    Operating expenses
        Mortgage interest, insurance, repairs, advertising, Property Manager, utilities, yard maintenance, losses, etc.
    Ownership expenses
        Property taxes, mileage, business cell phone, professional fees for accountants and lawyers, travel, convention attendance, business education, home office, etc.

8. Tax Advantages

 With real estate investing, the income you earn will likely be tax-free much of the time, due to depreciation and deductions you may be entitled to for mortgage interest. You can’t say the same about stock market or other equity investments, where you’ve got to pay significant taxes on dividends and interest payments.

9. No Liability, But All the Control

When you purchase properties as rentals, the best way to own the property is with a company like an LLC.  You want to “control” the rental properties and not “own” them. You may buy your personal residence in your name, but the investment properties should be put into a company you create, like an LLC. An LLC is a Limited Liability Company that you own and control, and the LLC then owns the property. Since it is the LLC that owns the property and not you personally, if the property ever gets sued, you are not personally liable and your assets will be safe. Remember that you “control” the property, not own it.
   It is also possible, if you buy property directly, to eventually turn over the direct involvement to a property manager for a percentage. That frees up your time and preserves your cash flow.

10. Making Money In An Up or Down Market

 When you own a rental property, you quite literally make money while you sleep. Even if you are actively involved in the management of your properties, you may not work every day but your tenants pay every day. And with strategies like FOW WORLD properties(in which you purchase a home in need of no repair, with a tenant and property manager already in place), increasing your properties won’t necessarily increase your workload but will definitely and immediately increase your income.

   Even better, though, is if you purchase your properties right and they cash flow from day one, you will not have to worry about an up or down market. Since the mortgage is fixed at 30 years and you have income coming in to cover the expenses, you will always make money. Rarely do rents ever go down, and actually they are always going up with inflation. In an up market, you can sell your properties and use a 1031 exchange and buy a better property with your gains. Also, in a down market, homes are cheaper, and the rent to purchase price is more in your favor.

11. Constant Demand for your Product

The product you are selling is basically a place to live for anyone. No matter what happens to the economy, people need a place to live and will be there to sign a lease with you for the property that you own. Since everyone needs a place to live, your product will never go out of style.

12. Hedge Against Inflation 

With real estate rental properties, your earnings are based on the rent your tenants pay. Increases in rent correspond to increases in inflation (and leases usually contain a provisions to that effect) but can also happen when a lease expires and a new one is initiated. Bottom line, while inflation may reduce the value of currency, driving prices up, property owners often make more money off their investment in inflationary environments.
      Inflation averages about 3% per year. If you keep your money in the bank earning .01% per year in your savings account, you are losing money every day. You may be gaining a few meager dollars, but those dollars buy less and less every year.

13. Insure Your Investment 

You can insure your rental properties against things like loss, theft, fire, and liability.  Just like you cannot get a loan for stocks, ask a insurance broker to give you  insurance for losses in the stock market.  He would laugh at you and then kick you out of his office.  If you own a rental property with a replacement value of $250,000, you can pay yearly insurance on the property of only $700 for full coverage and protect your investment.  How could that get any better?  Easy!  Have your tenants pay for the insurance by adding it into your numbers when you purchase the property.  $700 a year is $58.33 a month.  When you run your numbers when you purchase a property, make sure the costs of insurance is in there so you have it covered by the rents the tenants pay.

14.Retirement Benefits

Owning rental property produces cash flow. Plain and simple, it you hold onto rental property, you are ensuring future cash flow. Expand your number of properties and you expand your monthly cash flow. Social Security can’t be relied up and, sadly, many people are not very good at saving money. But in the long view, if you continue to invest rental property, you are guaranteeing your comfort and standard of living in your later years.

Degree of Control

    As the owner of an income-producing property, you have the ability to increase the value—and thus the income-producing potential—of the property. For instance, you can improve the landscaping, beautify the interior and/or exterior and rent to a higher-quality tenant at an increased rate. You have a degree of control, which is something you can’t really say for other kinds of investments.

    Unlike stocks, where you have no control over the business, you have complete control over your real estate rental properties business. Want to increase rents? Increase the value of the property. Need to replace an AC unit and want to save money by buying a smaller unit because the original was too big? That is your choice. Want to pass on a tenant that has bad credit and prior evictions? Again, all in your control. You have complete control over the business and property to do as you see fit

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    Conclusion

    Those are some pretty strong reasons to invest in real estate. If it all seems a bit distant or unreal to you, the best thing to do is read as much as you can on the subject.
    Now you can see why rental properties are the best investment that anyone can invest in.
    It is not reserved for the rich, just those who want to work hard and be independent.
       Now is the time to act! Get out there, look for properties, analyze the deal, put in offers, and get started on your rental property business!
    Do you have any questions or comments?
    I want to hear from you.
    Please comment below.