Investment Properties

There are lots of reasons that people decide to invest in real estate. I am going to highlight a few, including why I decided to get involved with rental property. This post will focus on 1 to 4 family homes.

1) Cash Flow – The current market in Lansing  provides truely remarkable opportunities for you to create a monthly cash flow by owning real estate.  In that last year I have sold clients (almost) move in ready homes for as low at $13,500.  When you consider that these homes can be rented for about $550 per month you can see how the returns begin to look very nice.  In fact, at the time this post was published there were 508 homes listed for sale for less than $50,000 in the Greater Lansing area. 

2) Principal reduction – One thing that every landlord can thank their tenants for is paying the mortgage. If you have leveraged the property through financing, you will increase your overall return on investment and you tenants will pay the principal down each and every month.

3) Depreciation – You are allowed to depreciate residential real estate for tax purposes over 27.5 years. Check with your accountant for the details, but this can add up to big savings at tax time, especially for those in higher tax brackets.

4) Appreciation/Hedge against inflation – Okay, so clearly real estate appreciation has not been at the forefront of benefits to owing real estate in the last few years. For those looking for long term investment gains, however, the clouds begin to clear a bit.  Historically, real estate over the long term appreciates between 3-4%.  In addition, if inflation gets going in the next couple of years (due to certain governments printing large amounts of cash…I’m sure there are other blogs about this) durable goods tend to be a good way to hedge against inflation.

5) An investment you can see and touch – Sure, I have an IRA.  We owe stocks.  But the thing I like best about real estate is that I have total control over my investment, not some guy on Wall Street.  I decided where to buy property.  I decide who I rent the proeprty to.  I decide what improvements to make, etc.