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.
- 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. 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.
To find out more about how rentals might complement your current investment plans, contact your real estate professional.