Now is the time to invest in rental property ownership, we are going to tell you the reasons why.
Mortgage interest rates are very low again.
There have been very few times in history when we’ve seen 30-year fixed mortgage rates at about 3.7% and 15-year mortgage rates closed to or above 3%. Because of this, this makes buying a rental property as a long-term investment very much in your favor.
You can also consider interest-only loans. The nice thing about interest-only is that the monthly payment goes down since you’re not paying down principle. This can make the unit more profitable, especially in the early years when most real estate investments have tighter cash flow constraints.
Real Estate is shifting toward a buyer’s market.
Although it’s been years, the housing market is shifting. Due to this, you’ll be able to find a property in your area at a fair market rate. Chances are, you’ll at least be able to use the rental income to pay off your mortgage and still have some profits from just the rent payments.
When a recession is coming, rental properties can be one of the best places to invest in.
If you put your money in the stock market right before a recession, it will be so up and down for you and your investment. If you put your money into a rental property in a city where rentals are constantly in high demand, you will likely find yourself with much more stable investment returns.
With that being said, the value of your property will likely go up more slowly or even decrease during a recession. As long as you keep the unit rented and are planning to hold for the long term, you’ll be able to wait out the recession while receiving a consistent cash flow on your rental property.
The double bottom line is hard to beat.
When you own a rental property, you initially have 2 sources of wealth income: the money you get from rent yielding a net profit each month of rent, and your home’s value growth.
Let’s use the following scenario as an example: You buy a $400,000 rental property, and decide to invest $80,000 of your money as a 20% down payment. In the 1st year, you get $2,000 per month in rent for the property. After paying all of the needed costs for upkeep, you clear $150 each month in net cash flow, or $1,800 for the year. This represents a 2.25% return on the $80,000 you put down. Overall, this doesn’t sound like a bad scenario to invest in a rental property.