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.