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Wednesday, August 28, 2013

What are the Benefits of Financing Investment Property?

What are the Benefits of Financing Investment Property?

Hello, everyone. This is the fourth video in our series on real estate investment. Our last video I spoke about the pros and cons of purchasing property with cash; today, I liked to talk about financing options. 
Sometimes people aren’t able or aren’t comfortable paying with cash. Financing is also an option. Consider this scenario with estimated numbers. Let’s purchase the same $100,000 home that we bought last video, but this time with financing.

If you put down $20,000, which is 20 percent, than you finance $80,000. You decide to charge $1,000 per month for rent. Now, with insurance, taxes, interest rates (around 5%) and repairs, that property will cost you roughly $630 a month. You are making a monthly profit of $370, $4,440 of yearly profit.

That’s a 22.2 percent return on investment, a higher return than the 9.6 percent return if you purchased the property with cash. With financing, though, you do take on debt.

The interest portion of the payment can be tax deductible. Please consult your tax advisor about more information on the regulations and requirements.

If you have any questions about purchasing an investment home through financing, please give me a call.

Thursday, August 15, 2013

Paying Cash for Real Estate

Hey everyone; welcome back to my video real estate blog! Today, I wanted to talk to you about the benefits of paying cash for a rental property. This is the third part in our five part series. Please consult your financial advisor for actual numbers.

Let’s say you buy a $100,000 rental and it rents for $1,000 per month. Now, if you pay cash, that’s $12,000 of income a year. Now, take into account $1,200 for taxes, $600 for insurance and $600 for repairs.  So, roughly that’s $9,600 a year of profit. That’s a 9.6% return on your investment.

Cash is the safest and most conservative way to go about this. Now if you have a CD or a money market account that is drawing 1%-2% interest, a 9.6% back is still pretty good.

On top of 9.6% return you also do have some depreciation benefits on your taxes. Consult your tax adviser on more details.

Thanks for watching!