The THREE Sources Of Financial Growth That Investment Properties Offer
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When looking at investment properties, many people only look at them from a cash flow perspective. Will the rent payments cover the expenses? How long will it take to make money from this? However, there is more to the story – much more.
The most commonly considered source of income is monthly cash flow. Simply put, you buy a place, rent it, and have someone else pay for your monthly mortgage payments. For example, say the monthly expenses, including mortgage, per month are $2000. And your monthly rental income is $2200. You will have a positive cash flow of $200 or $2400/year.
In the past, this was often the only draw of buying an investment property. Investors have since become savvier and are looking at the bigger picture. When contemplating purchasing an investment property, consider these other potentials.
#1 Property Appreciation Value – This is a way of looking at how your property’s value increases over time. Real estate increases dramatically over time and is one of the most solid and least volatile investments. Take a look at your local market or reach out to your trusted real estate agent to find out how sale prices have done over the last year, 2 years, 5 years, and 10 years. You’ll be surprised to find out how much real estate appreciates over time. And when it’s time to sell, this appreciation is money in your pocket!
#2 Mortgage Paydown – Let’s set the scene: you purchase a property and have tenants pay rent. With this rent, you pay off your mortgage and other expenses. Over time, your mortgage decreases – without you paying a dime! This is a commonly forgotten component of investment properties.
The moral of the story here is do not just look at cash flow. Take time to consider the entire situation and all THREE sources of profitability.
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JOSHUA CAMPBELL (@knowledgebrkr)
Real Estate Broker
Coldwell Banker The Real Estate Centre, Brokerage
249 Avenue Road • Newmarket, ON L3Y 1N8